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Intel Accepts Order To Stop Unfair Trade Practices In Japan

Mar 31, 2005 (04:03 PM EST)

Read the Original Article at http://www.informationweek.com/news/showArticle.jhtml?articleID=160401642


SAN JOSE, Calif. — Intel Corp. late Thursday (March 31) said it has accepted a recommendation from the Japan Fair Trade Commission (JFTC) to stop alleged unfair trade practices in the Japanese market.

JFTC's recommendation directs Intel's Japanese subsidiary, Intel K.K., to stop sales practices that it alleges shut out competitors from the Japanese microprocessor market.

It is unclear whether the agency will assess a penalty or will fine Intel. The JFTC has been conducting an antitrust probe against Intel since last year over alleged unfair business practices in Japan.

Issued on March 8, the JFTC recommendation alleged that Intel has abused its monopoly power to exclude fair and open competition, thereby violating provisions of Japan's Antimonopoly Act. The findings reveal that Intel used illegal tactics to stop Advanced Micro Devices Inc.'s increasing market share by imposing limitations on Japanese PC manufacturers.

Although Intel said it accepts the recommendation, it also disagreed with the facts underlying the JFTC's allegations and the application of law in its recommendation. Intel said it continues to believe its business practices are both fair and lawful, but added that the cease-and-desist provisions of the recommendation will not prevent it from continuing to meet customer requirements.

"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, Intel's vice president and general counsel, said in a statement.

"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," he said. "We do not accept the recommendation's allegations in its fact findings and the application of law. We believe the allegations misinterpret important aspects of our business practices and fail to take into account the competitive environment within which Intel and its customers compete."

JFTC has been conducting an antitrust probe against Intel since last April. The agency searched several locations, including Intel Japan's headquarters. It also interviewed two competitors and five major Japanese PC manufacturers: Fujitsu, Hitachi, NEC, Sony and Toshiba.

Intel, AMD and Transmeta supply virtually all microprocessors sold to PC manufacturers in Japan, and non-Intel processors accounted for only 24 percent of the Japanese market in 2002. With Intel's rebates, the non-Intel share dropped to 11 percent in 2003, according to the agency's findings.

Intel has allegedly offered commissions to customers when they used only its processors or limited their use of non-Intel processors to less than 10 percent of their total orders. The JFTC alleges that Intel's sales tactics shut out competitors in the Japanese microprocessor market in violation of its antitrust laws.




Earlier this month, Intel criticized a "recommendation" from the JFTC relating to Intel's business practices, sent to its subsidiary Intel K.K. Advanced Micro Devices Inc. praised the recommendation and called for other regions to punish Intel.

Intel did not specifically refer to the recommendations in a statement, but according to reports Intel has been told to take certain incentive clauses out of sales contracts for its microprocessors. Intel had approximately ten days to respond to the recommendation (see March 8 story).

Intel's Japanese unit won a two-week extension to reply to allegations of antitrust violations (see March 18 story).

In a statement, AMD praised Japanese regulators. "It is unfortunate that even when presented with specific — and very disturbing — findings of deliberate and systematic anticompetitive behavior, Intel refuses to face the facts and admit the harm it has caused to competitors and consumers," Thomas McCoy, AMD executive vice president, legal affairs and chief administrative officer, said in a statement.

"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," he said.

Intel has settled with government regulators in the past to avoid lengthy public antitrust fights, including a 1999 settlement with the U.S. Federal Trade Commission. Intel decided a lengthy antitrust fight wasn't worth the potential damage to its brand name, said Yoshihisa Toyosaki, president of iSuppli Japan. "If it rejected the recommendation and the dispute with JFTC continued, Intel's brand would be damaged." Toyosaki said PC makers also wanted a quick resolution to the dispute so that they can continue to use Intel products.

Meanwhile, European antitrust enforcers continue to probe Intel's sales practices in the much larger European market.

— Yoshiko Hara in Tokyo contributed to this report.