Intel in Antitrust Trouble in Japan

vincecate writes "The Japan Fair Trade Commission has ruled that Intel violated antitrust laws in Japan. Giving customers discounts based on the volume of your products they purchased is good business. However, Intel was adjusting customer discounts based on the volume of competing products they purchased, which is not legal. After the ruling, AMD responded saying, "We encourage governments around the globe to ensure that their markets are not being harmed as well". While Intel responded saying, "Intel continues to believe its business practices are both fair and lawful."

Standard PR response

[Anonymous Coward]

While Intel responded saying, "Intel continues to believe its business practices are both fair and lawful."

That's how PR hacks are taught to respond. When, for example, your CEO is stealing money, your PRish role is to go out and with a straight face say: "The core Value of our company is Honesty. We will introduce a Business Codex to emphasize our commitment."

It seems a bit harsh

[Phidoux]

but then again, if Intel wants to do business in Japan, I guess they should also abide by the rules. I'm sure AMD are happy.

Re:Give me a rational reason why this is a problem

[dhbiker]

I think you missed the point slightly, it goes something like this:

Intel: "if you buy 1 chip it costs $500"
Intel: "But if you buy 10 it costs $450 per chip"
Intel: "If company X wants to buy 10 then it will cost them $480 per chip because we found out they bought an athlon chip last week"

THAT is not on!!

Re:So carrots are legal, sticks are not

[Anonymous Coward]

Oh regarding Intel's comment that it "... continues to believe its business practices are both fair and lawful.". It might just be legal in some countries but how is it fair to use your dominant position to prevent other companies from being able to compete with you?

Statements like this are not meant to be factual. They are meant to influence opinions. "continues to believe" is a phrase that should warn you that a politician or a company is lying to you. Always replace it with "persists in claiming".

Like that but different

[MachDelta]

Actually, from the way TFA explained it, it sounded a little more like this:

Company A and Company B buy 500 intel processors.
Intel goes back to those companies and says "Hey, we'll pay you money^H^H^H^H a 'rebate' - if you promise not to buy any AMD chips for a while."
Company A says "ok" and gets the cash, Company B tells them to go to hell, and doesn't get squat.

But who reads TFA around here? :P

Bulls**t

[gomel]

The role of anti-trust legislation is the protection of consumer choice. Intel's discount was directly targeted to prevent an alternative.

Monopolies are bad, irregardless of whether they are owned by the state or privately. People living under communism had no choice, too. All they had was one-two products from one state-owned monopoly.

BTW, I assume that people are able to distinguish between cheese and CPUs on their own.

Re:Give me a rational reason why this is a problem

[R.Caley]

Obviously if a company is buying more of a competitor's products then they're buying less of yours, so your own are more expensive to them because they are buying in lower quantities.

But, if you read the article, that is not what was happening.

Rather, the scheme was that if I was buying 1,000,000 intel chips, and you were buying 1,000,000 intel chips plus 500,000 AMD chips, my intel chips would be cheaper. Ie it is not an issue of bulk discounts, but rather of bribes not to buy anything from AMD.

Now, pure free market theory would say this is fine, evenetually Intel will run out of money and the 10th firm to be built on the ashes of AMD will win out. However, that could take 50 years or perhaps longer than the integrated circuit industry will exist for. Anti-monopoly laws exist on the theory that a small distortion of the free market to speed up that attrition process and maintain some competition now is a general win.

Re:So carrots are legal, sticks are not

[Vince Mo'aluka]

it is only wrong if you threaten them when they consider using another companies product

Of course, Intel did not actually threaten to initiate force against their customers (theft, fraud, extortion, murder, rape, etc). If they had, there would be no debate over the ruling. Intel only "threatened" to stop engaging in voluntary trade with their customers! Can you not see the difference here? Or were you deliberately trying to present the case as an actual threat of force?

The fact is that Intel's customers voluntarily chose to do business with Intel, and they can voluntarily choose to end that business relationship. Can Intel choose to end the business relationship, as long as they don't break any contracts? Why or why not?

I can and have "threatened" to quit doing business with online stores who tried to sell me damaged computer parts. Should I be charged with antitrust violations? Why or why not?

Disclaimer: Personally I am no fan of Intel, and I buy AMD whenever possible. But I know the difference between a voluntary business relationship and on which is based on force. This isn't the mob we're talking about.

What's missing the from Intel statement

[Laurentiu]

"Intel continues to believe its business practices are both fair and lawful ,in spite of all evidence to the contrary."

If they keep on going like that, pretty soon we'll have Intel turn into a religion.

Re:Hey Intel...

[Bralkein]

Are you really surprised? Intel and all large corporations exist to make their organisation more valuable. They all push the law just as far as they think they can get away with... but this time, they judged wrong. I'd love to know about all of the dodgy shit that even fairly reputable organisations get up to, because I suspect there's an awful lot more of this stuff going on than your average person knows about.

I always think of it like this: they're not immoral, they're amoral. They just don't care about right or wrong, they can't afford to, because that's how the system works. I'm glad that they got caught, and I think we need much more government constraints put in place and have them actively enforced to prevent things like this from happening.

Of course, for that to happen, I'd need to buy myself a politician or two... and I'm only a poor student... care to give me a donation anyone? ;)

Re:So carrots are legal, sticks are not

[jackb_guppy]

You are using Voluntary very loosely.

Intel when up from 78% to 89% of the market.

Now the bases is same as Microsoft did to PC here in the US; "If you sell the others products, we will NOT give you money".

What is large market share in your business, if you sell another's products, you loose money that makes you profitable.

That is MOB (as in the market) talking.

Re:So carrots are legal, sticks are not

[Qzukk]

I can and have "threatened" to quit doing business with online stores who tried to sell me damaged computer parts. Should I be charged with antitrust violations? Why or why not?

Of course not, A) damaged goods are not an acceptable good and B) You're the buyer, you can do what you want anyway.

Now lets say you go to the computer store and the manager says "You own an AMD, so that video card in your hand will cost double" would you call that a fair trade practice? If they're the only computer store in the country?

Sick minds running corporations

[Anonymous Coward]

"Intel continues to believe its business practices are both fair and lawful."

After doing what Intel did, I can't believe someone would say this with a straight face. What a world we live in.

Re:Give me a rational reason why this is a problem

[R.Caley]

Well, unless you are assuming perfect information[...]and that no company has market power

No, that's the point, market power costs money to excercise (eg Intel has to pay people not to buy AMD, or keep it's prices below reasonable cost plu margin or whatever), so given a perfectly stable open market etc. etc. eventually the little guys who keep nipping at the monopolist's ankles will bring it down.

Unfortunatly, in the real world, there are barriers to entry, especially international ones and the world changes under us. And, of course, economic theories tend to assume agents in the market behave rationally, which we know is bollocks.

Re:Give me a rational reason why this is a problem

[meburke]

It's a problem because it's an American company doing business in Japan. Japanese companies do it all the time in foreign countries. NEC especially carved a niche by matching competitive prices (in the form of discounts and rebates) against IBM among large businesses that had a large number of IBM PC's. Once a big company like AMOCO started buying NEC desktops, they moved on to printers, etc. The program where they would give a rebate or discount when a customer traded in a competitive PC was effective for a while in the late '90's.

Of course, this wouldn't happen in Japan. Japanese keiretsu have pretty well divided up the Japanese business market satifactorily. Trying to skate a Japanese business away from an established vendor is considered socially deplorable. It's done, but very subtly, so it doesn't look like the computer company is establishing inroads in the competitor's market. In the US, their "cooperation" would be considered "collusion" and "price fixing".

Wanna read a cool book? "The Asian Mind Game" by Chin-Ning Chu explains a lot about the roots of Asian competitiveness and difference in ethical guidelines vis a vis The US and other occidental cultures. It will change the way you view Asian politics and business.

This attack on Intel may not even be aimed at Intel as much as laying the groundwork for an attack on Apple (which is actually doing OK against Sony in Japan) or the introduction of a Fujitsu replacement for the Intel chips a couple of years from now.

Replace REBATE with BRIBE

[lcsjk]

Consider this, "If you buy 100,000 of our product your price will be $1,000,000 for the lot. However if you agree to buy fewer or none of the competing AMD product, we will sell you the lot for $900,000."

Companies set their real prices based on the manufacturing cost of the product and the profit they must make on each to stay in business. Their sell price is NOT supposed to be based on whether the the buyer is also obtaining products from a competitor. Giving rebates or discounts based no that principle is similar to a bribe, and is illegal nearly everywhere [unless you are receiving the bribe ;) ].

Re:So carrots are legal, sticks are not

[bechthros]

Economic coercion is still coercion. If Intel made better chips, they wouldn't need to cut off the competition's balls. If economic coercion becomes accepted as standard business practice, it will be VERY detrimental to marketplace competition (which is to say, competition based on the merit of the actual product and not consumer loyalty) and therefore VERY detrimental to real Capitalism.

Film at 11. [maxbarry.com]

Re:So carrots are legal, sticks are not

[Vince Mo'aluka]

You're the buyer, you can do what you want anyway.

Aha, so there's a double standard? If I'm reading this correctly, the buyer is entitled to voluntary association but the seller is not? Does this apply only to big business or would it apply to (for example) a private sale of a used car?

"You own an AMD, so that video card in your hand will cost double" would you call that a fair trade practice?

Sure, I'll put my money where my mouth is. Yes, that is fair business practice. Whether it's smart business is another matter, but fair, yes. Why is it fair? Because the transaction (or lack thereof) is still engaged voluntarily. Why is voluntary association fair? Because human nature says so.

If they're the only computer store in the country?

Not likely -- hell, impossible -- in a free market scenario, but I'll bite anyway: yes, it's still fair (I prefer the less-ambiguous term "voluntary"). Of course, Japan's economy is not a free market (neither is the US -- not even close), so there's a worm in the apple right from the start. (I define a free market as one in which government is authorized only to protect against force, not one in which government is authorized to be the aggressor itself, as in today's world.)

Re:So carrots are legal, sticks are not

[qkslvrwolf]

Of course, Intel did not actually threaten to initiate force against their customers (theft, fraud, extortion, murder, rape, etc). If they had, there would be no debate over the ruling. Intel only "threatened" to stop engaging in voluntary trade with their customers! Can you not see the difference here? Or were you deliberately trying to present the case as an actual threat of force? The fact is that Intel's customers voluntarily chose to do business with Intel, and they can voluntarily choose to end that business relationship. Can Intel choose to end the business relationship, as long as they don't break any contracts? Why or why not?
This is like saying that my boss could tell me that I have to have sex with them, or I lose my job. There is no violence being threatend; only a mutually "consenual" adult relationship. I volutarily took the job, right? Yes, I do view monopolistic practices as the free market equivilant of rape, and no, that doesn't make me wierd.

Re:Has nothing to do with the dollar

[Anonymous Coward]

> I wonder, though... if Intel was doing this same thing with Dell. Might explain why Dell won't leave Intel... at all. Even though the Opteron has lately been a better product, and one for which there is significant demand.

Dell doesn't leave Intel because Dell is in the driver seat.

Every once in a while Dell issues a press release saying they're looking into using AMD chips. It likely coincides nicely with when they want something from Intel. Intel complies, Dell lets their AMD investigation die on the vine.

Re:So carrots are legal, sticks are not

[Anonymous Coward]

You are missing the parents point.. he talking about intel buying out AMD, he means if a computer distributor bought AMD then Intel would force the computer distributor out of business. The only reason that Intel could do such a thing is because they are the dominant player in the market.

Fair market implies that the products compete based on their merits. This ensure prouct innovation and is the best result for consumers. Any other practices to hinder competition are fundementally less beneficial to everyone except the winning company.

Re:So carrots are legal, sticks are not

[ultranova]

Let's take a hypothetical poll. Can you actually sit there and claim, with a straight face, that there could be any less than a 99.99999% majority who agree with this:

I try to avoid answering such questions, since any numbers I could come up would be pure guesses, and guesses aren't valid arguments. Nor do I think it's my place to speak for people I've never even heard of.

No human being has the right -- under any circumstances -- to initiate force against another human being, nor to threaten

Realistically, the only individuals who would disagree with that are mentally ill.

I have to disagree you on this. This principle is based on the unvoiced assumption that the only way other people can harm or coerce you is by using force. This assumption is incorrect; you can be harmed or coerced by denying you access to resources as well.

Let's take an extreme example: a man is starving to death before the gates of palace owned by a rich man, who feasts all day and night. The starving man can get no job (and thus no money and thus no food), since the rich man, through clever (and completely non-violent) manipulation of local economy has concentrated all wealth to himself. What will the starving man do ? Will he gather a mob of other starving men, raid the rich man's palace, and get something to eat ? Or will he follow the zero aggression principle and starve to death - after all, the rich man hasn't used force ? Can you actually claim, with a straight face, that the rich man is not doing anything wrong, but the starving man would be wrong if he did what he had to to survive ?

And if this example seems extreme to you, well, that's what the conditions were like for most of human history. A few controlled all the wealth and the rest got whatever scraps fell from their table. What's changed is that nowadays, at least in the industrial countries, there's enough wealth that even scraps make a comfortable living.

Even thieves, murderers, and rapists admit that they were wrong to commit their crimes, or at least admit that they wouldn't accept being a victim themselves (which is really the same thing as admitting they were wrong to commit the crime). That's the human nature part.

Since we are talking about murderers, thieves and rapists (althought personally, I think it's absurd to file thieves (as opposed to muggers) with rapists and murderers) answer me this: would you accept being locked into a prison for the rest of your life ? If not, then doesn't it logically (by your own logic) that locking up rapists and murderers is wrong ?

This is where it gets ugly. Logically, if a person has no right to initiate force as a means to an end, then he has no right to delegate that ability to another person on his behalf. BUT, the widespread disease of statism has instilled in people a general belief that if enough people get together (a majority), then they DO somehow acquire the "right" to initiate force as a means to an end (to ignore the zero-aggression principle).

Which gets us right back to the question of whether the zero-aggression principle is absolutely correct in all conceivable circumstances. I claim that it isn't, since it ignores the possibility of using resource starvation as a tool for extortion, and believes only force can be used in this way.

Furthermore, if you've suffered a wrong, what are your options ? Either you simply ignore it and get wronged again since obviously anyone can do so without fear of repercussions, or you take revenge and possibly start a bood feud between your family and the wrongdoers one, or you let society take vengeance for you.

If society as a whole doesn't have any rights its each individual member doesn't have, then society is powerless to stop blood feuds; either it has no power to take vengeance on the injured party's behalf, or it has no power to