Intel is making yet another attempt to overturn the 1.08 Billion Euro($1.2 Billion USD) fine they received over an anti-trust case regarding attempts to monopolize CPU sales to computer manufacturers. Intel claims that the “2009 EU fine was unfair, wrong, and formalistic”. Two years ago, the EU General Court rejected their appeal, and now Intel is once again attempting to overturn it at EU’s top court. A date for a ruling has not yet been set. According to Daniel Beard, a lawyer for Intel, “the key issue in the investigation was loyalty rebates to lower retail prices”, which he recently told the European Court of Justice. He felt that The European Commission did not recognize “all relevant circumstances”, in order to analyze if the rebates actually shut out rivals.
History of the Case
In June 2005, AMD sued Intel over a series of anti-competitive sales practices used to push AMD out of the market. The case stemmed from situations within other countries. The United States lawsuit is separate from the EU case.
Among these practices included providing computer manufacturers with rebates if 95% of the chips they purchased for personal computers were from Intel, paying retail stores to only stock x86 parts, and paying computer makers to delay launches of AMD hardware.
Acer, Dell, HP, Lenovo, and NEC are just some of the manufacturers known to have been manipulated by this sales practice.
According to Extremetech, the deals varied by company. Some companies were given exceptions to the rules, such as only requiring 95% of business class processors to be from Intel, rather than 95% of all processors. At least one company was not allowed to sell any AMD notebook chips at all. The carefully designed deals enabled Intel to seize control of the CPU market, with their market share of desktop sales doubling over the course of less than a year.
This MCP table shows how Intel increased their incentives after AMD launched their dual core Athlon 64 CPUs, which were a serious threat to Intel.
The deals were carefully designed to get companies to accept them, while being as beneficial to Intel as possible, at the expense of AMD. Intel recognized the needs of certain companies to provide CPUs from other companies for certain markets for reasons such as compatibility, so instead of requiring 100%, a 95% limit would enable Intel to accomplish the same goal without seeming as demanding. By creating unique deals with different companies in response to the needs of companies, Intel managed to improve sales using every method other than simply lowering their prices to a more competitive amount.
In a time where AMD competed very well in regards to price/performance, this deal effectively destroyed the ability of companies that sell computers to offer a diverse range of products, forcing them to stick with Intel almost exclusively to receive the best deals via rebates. By not meeting the 95% criteria, they would not receive rebates from Intel, and therefore would lose a competitive edge against computer makers that do maintain that level of exclusivity.
As a result of the EU case, Intel was fined 1.08 Billion Euros($1.2 Billion).
In addition to the $1.2 Billion fine from the European Competition Commission, Intel agreed to pay AMD $1.25 billion to settle the case, on the basis that AMD drops all pending litigation. Intel also agreed to “abide by a set of business practice provisions”. Intel agreed to discontinue any of the following practices:
Offering inducements to customers in exchange for their agreement to buy all of their microprocessor needs from Intel, whether on a geographic, a market segment, a product segment, or distribution channel basis.
Offering inducements to customers in exchange for their agreement to limit or delay their purchase of microprocessors from AMD, whether on a geographic, a market segment or any other basis;
Offering inducements to customers in exchange for their agreement to limit their promotion, production or distribution of products containing AMD microprocessors;
Offering inducements to customers in exchange for their agreement to abstain from or delay their participation in AMD product launches, announcements, advertising or other promotional activities;
Offering inducements to retailers or distributors to limit or delay their purchase or distribution of computer systems or platforms containing AMD microprocessors; and
Withholding any benefit or threatening retaliation against anyone for their refusal to enter into a prohibited arrangement such as those set forth above.