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EC Biased & Suppressed Evidence: Intel

Claims the EC’s conclusions about Intel’s rebates and discounts “are wrong, both factually and legally”

Wasn't it curious how the European Commission up and managed to get a kinda expurgated "provisional" copy of its 500-odd page antitrust decision against Intel, which has been sitting around since May 13, the one that Intel has appealed, out and about right before Intel's Developer Forum this week?

The EC's not in the habit of releasing "provisional" copies of its decision so you can bet your bippy we're in the middle of a propaganda war here.

The publication came with Cliff Notes for those in the press unlikely to ever sit down and read the whole thing.

The EC managed to compress its choicest tidbits into a few pages, which in sum amounts to nothing that it hasn't said before.

One little cutie has a Dell guy e-mailing that Intel is "prepared for [all-out war] if Dell joins the AMD exodus. We get ZERO MCP [name of Intel rebate to Dell] for at least one quarter while Intel ‘investigates the details'...We'll also have to bite and scratch to even hold 50% including a commitment to NOT ship in Corporate. If you go in Opti [Dell product series for corporate customers], they cut it to <20% and use the added MCP to compete against us."

Sounds on the face of it like the EC has Intel by the short hairs, doesn't it? Except Intel says that the EC is quoting a low-level planning guy whose job was to imagine worst case scenarios, not someone who was reporting reality. And so it goes.

Intel has promised a statement from Dell backing it up. We have asked Dell, we are still waiting.

To rebut the EC, Intel put out a position paper that claims the EC was biased from the get-go and that it "suppressed evidence" - like the evidence it took and disappeared from a unidentified Dell senior executive, evidence that Intel took in July to the Commission's Ombudsman, who concluded the Commission was way out of line.

Intel claims the EC's conclusions about Intel's rebates and discounts - purportedly at below cost levels - "are wrong, both factually and legally."

It claims "The Commission relied heavily on speculation found in e-mails from lower-level employees [at Dell, HP, Acer, NEC and Lenovo] that did not participate in the negotiation of the relevant agreements if they favored the Commission's case. At the same time, they ignored or minimized hard evidence of what actually happened, including highly authoritative documents, written declarations and testimony given under oath by senior individuals who negotiated the transactions at issue."

The EC has already admitted that no written Intel contract stipulates that any OEM was required to buy all or most its chips from Intel or that it should delay or disappear any proposed AMD box, as alleged.

Intel also maintains that the EC "consistently construed ambiguous documents in a manner adverse to Intel, while overlooking or dismissing authoritative documents as ‘insufficiently clear' when they contradicted the Commission's case. This pattern occurred across the board with respect to documents and statements submitted not only by Intel but also by third parties. The result was that the Commission dismissed or ignored extensive exculpatory evidence."

Intel claims to be over a barrel. It can't provide a detailed response to the redacted decision, "because it must first obtain permission from the third parties who submitted evidence to the Commission, which the Commission decision ignored, but which presents the complete story." It also says that much of the evidence is deemed confidential under EC rules and it can't elaborate on it publicly.

Intel accuses the EC of failing to understand "the competitive setting involving Intel and AMD (the only two major providers of x86 microprocessors for computers) and the large computer OEMs in what was a three-way dynamic, where large and powerful OEMs pitted Intel and AMD against each other to obtain the best products for the lowest price on the best terms. While natural, such pressure on sales personnel can cause high emotions and an atmosphere of suspicion. Uncertainty is inherent on both sides in the negotiations. The Commission essentially decided that it was unlawful for Intel not to have affirmatively dispelled any uncertainty that an OEM might have had about the level of discounts Intel would provide if the OEM chose to buy less from Intel and more from AMD. In doing so, the Commission ignored the dynamics of these negotiations. The OEM typically threatened to move purchases to AMD in its quest to drive the best bargain it could with Intel, and Intel competed in a state of uncertainty to win all the business the OEM was putting up for bid. The OEM did not ask Intel what discounts it would provide if the OEM decided to buy from AMD rather than Intel. Intel had every incentive to compete for all the business."

Intel says the "Commission also ignored the reality that, in a competitive market with two major suppliers, when one company makes a particular sale, the other one does not. This natural consequence of vigorous competition is clearly not evidence of anticompetitive behavior by the larger company when it wins. Furthermore, the Commission's view of the microprocessor market does not match the reality that microprocessor supply contracts are very short - three months on average - and there are many times in a calendar year when Intel and AMD compete for some part of each computer OEM's business, with continual new opportunities to win contracts."

More Stories By Maureen O'Gara

Maureen O'Gara the most read technology reporter for the past 20 years, is the Cloud Computing and Virtualization News Desk editor of SYS-CON Media. She is the publisher of famous "Billygrams" and the editor-in-chief of "Client/Server News" for more than a decade. One of the most respected technology reporters in the business, Maureen can be reached by email at maureen(at)sys-con.com or paperboy(at)g2news.com, and by phone at 516 759-7025. Twitter: @MaureenOGara

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