Intel Faces The Music in Japan

Intel said it will immediately change the way it
does business in Japan as part of its punishment for alleged
anticompetitive behavior.

Earlier this month, Japan’s Fair Trade Commission (JFTC) found Intel
had
engaged
in market activities
to keep the competition out.


Intel was accused of giving rebates and tapping into other finances like its “Intel Inside”
marketing fund to influence Japanese computer makers to use only Intel’s chips. The JFTC said the maneuvers were also designed as a deterrent from doing business
with Intel’s competitors like AMD .

The restrictions are a significant setback to Intel considering the
company’s total sales in Japan last year reached $34.2 billion, or
about 9 percent of its business overall.

To circumvent some of the pain points of a Japanese probe, Intel said it
will agree to the JFTC’s cease and desist provisions, even if it does not
agree with their conclusions.

“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,”
Bruce Sewell, vice president and general counsel for Intel, said in a
statement.

Intel had ten days to either comply with or appeal the ruling, but
requested a two-week deadline extension. Now that Intel has elected to
accept the recommendation, the company will need to alter business
practices. It will also have to notify its customers that
any such practices have come to an end.

“We believe the recommendation’s cease and desist provisions define a
workable framework that enables us to continue to provide competitive
pricing to our customers, and benefits consumers and the Japanese
economy,” Sewell said.

Carol Barrett, a director of enterprise platforms at Intel, told internetnews.com earlier this week that
accusations claiming Intel was trying to lock in OEMs is just absurd.

“When you are working with multiple sides on a project, you need a
consistent foundation that does sometimes have restrictions upon it,”
Barrett said. “We do not tell these companies that you can only sell one
type of product. There are limits to what we can do from a marketing
perspective because there are different capabilities from U.S. to China
to Europe. So having a multi-platform like that addresses that support.”

Intel’s chip-making rival AMD was not as discreet in its assessment of
Intel’s actions.

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

The charges came after JFTC officials raided three Intel offices in Tokyo last April. As part of its investigation, the JFTC found that some manufacturers were required to
buy 100 percent of their CPUs from Intel, while another manufacturer was
forced to cut back its non-Intel purchases to 10 percent or less.

The recommendation also revealed that Intel imposed these
restrictions in direct response to AMD’s market share in Japan between
2000 and 2002. The recommendation also notes that as a result of this
misconduct, the combined Japanese market share of AMD and a second, much
smaller CPU company fell from 24 percent in 2002 to 11 percent in 2003.

Intel is also facing scrutiny from the European Commission over its
market practices, namely that the company had strong-armed PC makers into deals. Intel said it is cooperating with the
Japanese and European authorities.

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