Intel's processors drive four out of every five personal computers worldwide. Advanced Micro Devices believes this dominance is because of Intel's unfair trade practices and started the war three years ago when it filed charges with the European Commission. The EC regulators opened an investigation at that time that is still ongoing.
According to the Japanese media last week, regulators were investigating the charge that Intel intentionally undercut competitors by offering large discounts and by threatening to stop shipments of Intel chips unless PC makers used its chips exclusively. The European charges filed in 2001 were similar. Advanced Micro Devices complained that Intel used its market position to reward loyal customers and punish others that weren't. Advanced Micro Devices' fortunes are definitely suffering because of Intel's dominance.
One fact that is known for sure is that Intel offers marketing subsidies to PC makers that include the "Intel Inside" logo in their advertisements. The "Centrino" label for Intel's wireless networking chips is another commonly used logo that PC makers use to get subsidies. Marketing subsidies is a common practice in all businesses for similar advertising promotions. Antitrust problems can arise, though, when a company uses financial incentives to exclude competitors and lock up a distribution channel.
The key question is whether Intel is using the carrot-and-stick approach -- punishing PC makers that don't use Intel chips exclusively while rewarding those that do. That practice of punishment and reward could be an unfair trade practice that undercuts competition.
Microsoft could be paying $601 million for its unfair trade practices because of fines imposed by the EC regulators last month. If Japan regulators make a similar decision, Microsoft could be facing additional fines there. The software king is appealing the European decision, but even if Microsoft lost its appeal, the company has plenty of cash to pay those fines.
Intel doesn't have as strong a cash position, and similar fines could have a much greater impact on Intel's balance sheet. It will be important for Intel shareholders, then, to pay attention to these ongoing developments in Japan.
What's your opinion about Intel's business practices? Talk about the issue with other Fools on our Intel discussion board.
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