Fair trade

The Japan Fair Trade Commission (JFTC) has found that Intel has abused its monopoly power to exclude fair and open competition, thereby violating Section 3 of Japan’s Antimonopoly Act.

The findings reveal that Intel used illegal tactics to stop its competitors from increasing their market share by imposing limitations on Japanese PC manufacturers.

The result, the JFTC said, was that the market share of Intel’s competitors AMD and Transmeta dropped from 24% in 2002 to 14% in 2003.

Specifically, the JFTC found that some manufacturers were required to buy 100% of their CPUs from Intel and another manufacturer was forced to curtail its non-Intel purchases to 10% or less. Intel separately conditioned rebates on the exclusive use of Intel CPUs in specific PC product lines or brands in order to eliminate competitor CPUs from key OEM brand lines.

Intel’s activities in Japan include the use of its “Intel Inside” program, market development funds and other rebate programs. According to Intel competitor AMD, Intel’s tactics locked-in OEMs and prevented them from doing business with Intel’s competitors.

The JFTC recommended that Intel end the use of rebates and other funds to illegally distort competition, notify its customers and educate its employees that it may no longer provide rebates and other funds to Japanese computer manufacturers on conditions that exclude competitors’ CPUs.

Intel has now elected to accept the JFTC recommendation to alter its business practices.

But the company says that it does not agree with the facts underlying the JFTC’s allegations – Intel continues to believe its business practices are both fair and lawful.

“Intel respectfully disagrees with the allegations contained in the recommendation, but in order to continue to focus on the needs of customers and consumers, and continue to provide them with the best products and service, we have decided to accept the recommendation,” said Bruce Sewell, vice president and general counsel for Intel.

Needless to say, AMD were unimpressed by Intel’s attitude.

“It is unfortunate that even when presented with specific – and very disturbing – findings of deliberate and systematic anti-competitive behaviour, Intel refuses to face the facts and admit the harm it has caused to competitors and consumers,” said Thomas M. McCoy, AMD executive vice president, legal affairs and chief administrative officer.

“Although Intel’s willingness to comply with the JFTC recommendation is a step in the right direction, it has conspicuously failed to either accept responsibility for its actions or acknowledge that competition is best served when customers and consumers have a choice. The JFTC determined that Intel conditioned its pricing based on customers not doing business with competitors; governments around the world must ensure that such anti-competitive actions are not impacting their markets as well.”

The European Commission recently stated that it is investigating Intel for possible similar anti-competitive business practices in Europe and is co-operating with the Japanese authorities.