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Korea Fair Trade Commission rules against Intel

Guilty of bullying AMD
Tue Mar 10 2009, 21:39

THE AMERICAN ANTITRUST Institute has taken a crash course in Korean, translating chunks of a 133 page ruling which says Intel abused its market dominance through the use of rebates, bullying customers into choosing its chips over rival AMD's.

Apparently the Korea Fair Trade Commission has found Chipzilla guilty as charged for "unfairly excluding competitive enterprisers" and harming customer interests using rebates in a carrot and stick approach to steer business away from Intel's only (and much smaller) competitor, AMD, in violation of the Monopoly Regulation and Fair Trade Act.

Intel apparently used the dirty trick of selling its wares at "unreasonably low prices" and buying goods or services at unreasonably high prices in order to have its way, something so uncharacteristic (*cough*, NOT) it has us reeling in shock and disbelief.

Samsung was one of the firms named in the suit as having been bullied into choosing Intel CPUs over AMD's back in 2002. Apparently, Intel "continuously requested" Samsung stop buying from its competitors, and when the word "please" didn't work, Intel decided to get abusive, significantly reducing its volume of rebates to the electronics giant in the first and second quarter of 2002. Chipzilla then asked again. With a little ‘aggressive' tone on the "please" no doubt.

Come May 2002, Intel purportedly realised it needed to take things to another level, implementing a "long term support plan" offering sweeteners like maximum-level rebates on the condition, of course, Samsung spent its cash buying blue.

The AAI document reckons Intel put an $800 million rebate proposal on the table in exchange for Samsung dumping AMD CPUs. No prizes for guessing whether or not Samsung took the bait. After all, it would be bad business not to, right? To hell with the moral high-ground.

The document also claims Intel set up something dubbed the "Samsung Risk Mgmt Plan" in January 2002, a master plan of sorts to isolate AMD and leave little Chip Kong out in the cold.

The same shady tactics were used with Sambo Computers in Q3 2003 and sure enough, Sambo folded like a napkin and started swapping AMD CPUs out for Intel's in Q104.

TweedlesAs if that wasn't enough, Intel decided to push Sambo even further, asking the firm not to take part in an AMD product launch of 64-bit CPUs in September 2003 and requesting Sambo keep Intel CPUs at the 70 per cent mark within domestic-consumption PC CPUs from fourth quarter 2004 to second quarter 2005. Sambo agreed and got its reward in rebate blood money.

According to the Korean commission Intel's rebate system was "not a volume discount program but a system where the amount of rebates is reduced or increased according to fulfillment of conditions involving exclusion of competitors, through the determination of ECAP applied items, amount of discounts, and payment of MDF, regardless of partner's purchasing volume".

The committee also reprimanded Chipzilla for "Non-transparency" and for "rendering negative effects on consumer welfare" by pushing the market price way above the competitive market price which could have been reached with a common and simple volume discount policy.

When we confronted Intel's Chuck Mulloy with the ruling, he sighed and said Chipzilla believed there were "significant legal, factual and economic issues with the findings" and that Intel was filing suit in Korea to overturn it. Mulloy said the case would be done "de novo", meaning the entire case will be reviewed and all testimony will have to be sworn testimony - something Intel is quick to point out was not the case with the KFTC.

"You should not assume that ANY of the facts asserted by the KFTC are true" said Mulloy when we put it to him this was just Intel playing the big corporate bully of the playground, again.

"The KFTC opinion does not reflect the reality of the market or what happened. We'll prove that in court" said Mulloy, adding that it was hardly surprising the AAI was siding with AMD as the firm was a paid member and in no way objective.

Of course it remains to be seen how Korea's decision will affect the various other antitrust trials raging against Intel at the moment, but according to one AMD spinner we talked to "the document speaks for itself".

"Take your pick. KFTC, JFTC, EU. Based on the evidence obtained from Intel and its customers, they have yet to convince any antitrust authority that they have not broken the law" he added.

Either way, it certainly seems that when it comes to playing with chips, Intel's favourite board game is a high stakes game of Monopoly. µ




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