Will The FTC Follow the EC’s Intel Fine?

Intel’s ability to dominate worldwide computer markets has been dealt a blow by the European Commission. Not a fatal one, by any means, but a fine of more than €1 billion will be a potent signal to others such as the US FTC . And while we wait on that, we can start to imagine how the PC market might look if Intel’s grip is loosened.

The fine amounts to only 4.15 percent of Intel’s turnover in 2008, which is under half the ten percent that the the EC is allowed to impose in such cases. Despite this, it is the largest fine ever imposed by the EC, beating the €497m fine imposed on Microsoft in 2004 by a long chalk. Although, in fact, Microsoft ended up paying more, as its failure to pay the 2004 fine led to a further fine of $899m in February 2008.

A fine this big gets a big reaction. The EC decision is so big and damning it will “compel” the US Federal Trade Commission (FTC) to follow suit, according to comments from, among others, David Balto, a former antitrust policy director at the FTC, quoted by Reuters. As well as an FTC investigation, there are civil cases against Intel, including one in Delaware, filed by AMD and due to start in 2010. Intel has objected to the fine, and AMD has welcomed it.

But in itself, it may make little immediate difference. “The decision is unlikely to make any significant change in market conditions,” said Martin Reynolds, managing vice president and fellow at analyst firm Gartner. “The Intel-AMD market share is likely to remain roughly aligned with manufacturing capacity, adjusted for technology capabilities.”

Unlike Microsoft, Intel will take its punishment and pay up, thinks Reynolds, and then “carefully inspect its sales relationships to protect against risky influence”. Intel’s concern over this fine will come a distant third behind worries about the overall size of the market, and any loss of market share.

The money goes to the EC’s budget, and reduces annual payments from member states such as the UK (so, if the UK government passes the savings on, it might actually reduce my tax bill by a tiny amount, thank you Intel!).

The money doesn’t go to the victim, so AMD will not benefit directly, except inasmuch as users and regulators follow up on the issue.

“It’s not about the money,” said TBR analyst John Spooner. “It’s about influence.” Intel has a number of levers to control the PC market, he said, including rebates (also known as market development funds), basic processor pricing, platform discounts the Intel Inside marketing campaign. The EC is trying to reduce these, and limit Intel’s ability to shape the PC market.

Things won’t change overnight, and the PC market will still be largely what Intel says it will be. AMD will still have to work hard to get its processors established, particularly in the ever-conservative business sector.
But what might PCs be if Intel did not control them? Spooner thinks netbooks could be very different. There might be more experimentation, with 12 or 14 inch screens, instead of leaving that sector to Intel’s forthcoming CULV processors.

And the long-term effects of the decision? They wait on the follow-up in the US.