Intel Could Face Fines for Unfair Pricing Model

By Jane McEntegart
published

News broke earlier this week that Intel could be facing sizable fines from the European Union in relation to the company’s pricing model.

Reuters this week reports that the European Commission, which has said Intel’s pricing practices were an attempt to drive AMD out of the market, is set to rule on whether or not the company should be fined. It seems the European Union has a big problem with the way Intel has been doing business, in particular rebates to computer makers and retailers.

Intel denies charges related to rebates offered as long as manufacturers agreed to obtain the majority of their processors from Intel as well as paying them to either to delay or cancel the launch of AMD based products. The company maintains that its actions were within legal boundaries.

However, while fines are never pleasant, especially during times when money is tight, the maximum fine would be 10 percent of Intel’s annual revenue. The Reuters report contains something which would cause worse pains for Intel: the possibility that the European Union could impose new rules in order to remedy Intel’s actions. Former Commission official Michael Tscherny hinted at just that and said the European Commission could destroy Intel’s pricing model.

"Will the Commission impose something that would destroy their pricing model, open up the market to competition and new entrants or to AMD? That is what they would be worried about, more than their reputation or anything else," said Tscherny.

Read more on Reuters.

40 Comments Comment from the forums
  • hellwig
    Well, Intel did that here in the U.S., why wouldn't they have done it in Europe as well? While I think the EU fines are a little ridiculous, at least they are looking out for the consumer.
    Reply
  • mrubermonkey
    Only more reason to do custom builds or contract someone to do a build for you.
    Reply
  • NuclearShadow
    I really can't see how Intel was doing anything wrong with those rebates as I'm sure retailers are hesitant to stock up on expensive CPU's that may not sell. This at least gives the retailer the ability to feel a little more secure.

    Now if they did indeed make the stipulation to delay or stop the release of AMD products being sold by the retailers and computer manufacturers then they certainly are in the wrong and deserve to be punished. However no one should assume that this is what happened until we actually see some sort of evidence.
    Reply
  • jrivera04
    Intel may have fudged with its pricing model but the fact still remains that AMD is in its current situation because it let its guard down. When Intel released Conroe AMD was resting on its laurels.

    Then when they released their new chips chips were so buggy the people lost confidence in AMD.

    I am glad that the Phenom II is such a great chip but if it would have been released along side of the Conroe, AMD wouldn't be bleeding cash the way it is.
    Reply
  • A Stoner
    hellwigWhile I think the EU fines are a little ridiculous, at least they are looking out for the consumer.Looking out for the consumer? What they are complaining about is that Intel is making a profit selling processors below the break even point of it's competitor, AMD. How exactly is that looking out for the consumer. The EU in this instance is telling Intel to raise it's prices to shield AMD from real compitition. If AMD were a functioning company, it would not need protectionist' to come to it's rescue. While it is good to have compitition in the marketplace, and thus not allowing Intel to become a monopoly simply because the only other company making X86 chips goes out of business, it does not make it right for them to prop up the price of computer chips which increases the price for the consumer. Even with Intel's HUGE lead in processor capability, they have not slowed down their research and developement, nor have they cut back on the tick-tock release cycle, which tells me that Intel is a play-by-the-rules-and-give-the-customer-the-best-value-they-can company, while also increasing it's value to it's share holders. This is in no way a statement that AMD is not a play-by-the-rules... The EU seems to be the group interested in increasing prices to customers...
    Reply
  • tenor77
    This is capitalism folks. Sorry for the crude analogy, but if you start a cock fight don't be shocked when they go for blood. The nature of the beast is that one will try to win. If you set up the arena and throw both birds in the ring don't kick the one that's ahead because it's doing better. This is coming from a guy using AMD and ATI products for the last decade. No love for Intel here.

    I'm all for competition but the fact remains that I'm sick of people getting bent out of shape when companies in a fight for survival act like it. Especially when it's okay for the smaller companies but not the larger ones. If they didn't do anything that people wouldn't care if AMD did, then drop it EU.
    Reply
  • wikiwikiwhat
    AMD, I really hate that you bought ATI. I love ATI and hate AMD. You are never winning the CPU war again.
    Reply
  • scarpa
    "AMD, I really hate that you bought ATI. I love ATI and hate AMD. You are never winning the CPU war again."

    AMS will win the war for sure, Intel doesn't know what's coming right around the corner.
    Reply
  • scarpa
    AMD
    Reply
  • hellwig
    A StonerLooking out for the consumer? What they are complaining about is that Intel is making a profit selling processors below the break even point of it's competitor, AMD. How exactly is that looking out for the consumer. The EU in this instance is telling Intel to raise it's prices to shield AMD from real compitition. If AMD were a functioning company, it would not need protectionist' to come to it's rescue. While it is good to have compitition in the marketplace, and thus not allowing Intel to become a monopoly simply because the only other company making X86 chips goes out of business, it does not make it right for them to prop up the price of computer chips which increases the price for the consumer. Even with Intel's HUGE lead in processor capability, they have not slowed down their research and developement, nor have they cut back on the tick-tock release cycle, which tells me that Intel is a play-by-the-rules-and-give-the-customer-the-best-value-they-can company, while also increasing it's value to it's share holders. This is in no way a statement that AMD is not a play-by-the-rules... The EU seems to be the group interested in increasing prices to customers...\

    Astoner, what happens when Intel wins and AMD goes under. You think those low low prices are going to stick around?

    Look at Walmart. Sure, they move in with low prices to undercut their competitors, and in big cities, they may drive out mom-and-pops but other big chains stick with them. However, in small areas where there is no competition, Walmart doesn't keep those low prices.

    The ONLY reason to drive out competition is to become the only provider. Once you are the only provider, you set the rules. This is why we have anti-trust legislation here in the U.S. as well as abroad. Look at the old railroad companies, look at the oil companies. Why is gas always the same price regardless of which gas station you buy it from? That's because the oil is controller by OPEC, a cartel. They control the worlds oil supply, and they set prices. Why are diamonds so expensive? Because DeBeers, another cartel, controls the worlds diamond supplies. You want Intel deciding how much you spend on a computer, I think not.

    If you actual think Intel reduced their prices to benefit the consumer, you have no idea how global economics works. Read a damn book sometime.
    Reply