Intel Chairman Craig Barrett |
US Chipmaker’s Court Fight May Affect Global Monopoly
By Kim Tong-hyung
Staff Reporter
Has Intel been coercing personal computer (PC) makers into buying more of its chips, and fewer from industry rivals, to maintain its virtual monopoly on the market?
The Fair Trade Commission (FTC) certainly thinks so, when it hit the U.S. chip giant with a 26 billion won (about $19 million) fine for offering kickbacks to Samsung Electronics and Trigem Computer to buy its product exclusively.
However, Intel is now looking to overturn the ruling in court, claiming that the country's antitrust regulator is failing to understand the dynamics of the microprocessor market.
In filing complaint with the Seoul High Court, the company said it was seeking to demonstrate that its business practices are were ``fair and lawful.''
Although declining to disclose the specific details of the complaint, citing sensitive business information, the filing asserts that the FTC made substantial factual and legal errors in formulating its opinion, Intel said.
``Intel also believes that the KFTC has misinterpreted or chose to ignore large amounts of economic evidence and analysis demonstrating the ultimate benefit to consumers from the reduced prices and increased performance of Intel's microprocessors,'' the company said in a statement.
The FTC is basically telling Intel to ``bring it on.''
``It will take sometime, but the truth will come out,'' FTC spokesman Ji Ho-cheol told reporters.
``In attempting to push out Advanced Micro Devices (AMD), its competitor in the CPU market, Intel has been providing rebates to Samsung and Trigem, the country's two largest computer makers, in exchange for not buying AMD chips. The evidence is clear, so we are confident about our chances,'' he said.
The looming court battle is garnering plenty of attention in the local PC industry, as it looks to be a crucial debate about where to draw the line between promoting aggressive price competition and discouraging predatory pricing, which eventually leads to higher prices and less consumer choice.
Since 2005, the FTC has been investigating that Intel abused its market dominance by pressuring the top two PC makers not to use AMD's microprocessors. Intel is also under investigation by European Union (EU) regulators for similar practices.
According to the Korean antitrust agency, Intel has provided about $30 million to Samsung since 2002 in exchange for excluding the procurement of AMD processors. Trigem accepted about $7 million from Intel during roughly the same period, officials said.
Although Intel declined to detail the specifics of its deals with local PC makers, the rebate rates were believed to be about 3 percent of the money the companies spent on buying the chips.
Intel is denying the allegations of murky business connections, explaining its payments to Samsung and Trigem were a form of volume-discounts for the chips purchased.
Under the company's global ``Intel Inside'' program, PC makers are required to include the ``Intel Inside'' logo in their advertisements on television and other media. Once a PC maker meets its strict marketing guidelines, Intel then subsidizes the advertisements by reimbursing a certain amount from the price of the vender's monthly processor shipments.
Although Intel's providing of marketing funds has become conventional in PC industries around the world, rival chipmakers such as AMD are arguing that the practice is simply a form of tied sales.
Samsung and Trigem, obviously angry about their involvement in the mess, are predictably Intel's biggest backers in the legal dispute.
``The marketing funds are provided to all PC makers, not just Samsung and us, and even AMD offers subsidies for advertisements,'' said a Trigem spokesman.
``We use Intel products because of the company's reputation and the strong awareness among customers. It would be a burden for us to switch to AMD-based products suddenly.''
In response, the FTC said Intel providing marketing funds to PC makers is not a problem, but the exclusive nature of the dealing is. Regulators claim that Intel provided the discounts on the condition that PC makers use only its chips.
According to the FTC, Intel reached an agreement with Samsung in 2002 to offer rebates in exchange for the Korean electronics giant halting its procurement of AMD chips from the fourth quarter of that year to the second quarter of 2005.
The share of Intel chips in Samsung computers dipped below 90 percent in early 2002, but recovered to 100 percent again after the second quarter of 2003.
Intel also offered $2.6 million to Trigem in 2003 in exchange for using only Intel chips on the company's computers sold through television shopping channels, the agency said.
Intel controls about 80 percent of the global market for microprocessors and more than 91 percent of the Korean market.
thkim@koreatimes.co.kr
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