Tuesday, March 10, 2009

Intel found guilty

Original source is here.

"In the beginning of January 2001, the defendants suggested a total $800 million rebate
proposal to Samsung on the condition of abandoning the AMD CPUs-installed PC
models named 'Airfox' and 'Leo'(defendants described it as "AMD Drop"2), with
concerns such as an erosion of domestic market share, a difficulty of accomplishing
100% Intel CPU MSS, an increase of AMD’s brand value, and domino effects to other PC makers3. As Samsung rejected this proposal, defendants established a plan named
"Samsung Risk Mgmt Plan" in January 22, 2002. According to the plan, the defendants
would focus on a marketing plan for isolating AMD, also no rebate benefits and no comarketing
program with Samsung. Then, the defendants notified Samsung that it would
not help but to reduce the volume of rebates if Samsung adopted AMD CPUs. (Omitted)
After this notice, as the illustrates, the defendants actually reduced the
amount of rebates by $0.76 million in the first quarter of 2002, which was significantly
under the prior level of rebates (average $4 million quarterly)." (18p)

"ooo and ooo, respectfully, the Chief of Samsung's Computer System Headquarters’
Purchasing Team and the Division Chief of the same department, and ooo, the Director of
Planning Group, consistently testified that the defendants suggested rebates in
exchange for abandoning the AMD CPUs-installed PCs, or in exchange for retaining
the 100% Intel CPU MSS. They testified also that defendants reduced the amount of
rebates and stopped providing MDF money to Samsung when Samsung rejected the
proposals. (20p)

"According to Samsung's internal documents named "Review of Intel Special Proposal"
(produced in January 29, 2002), Intel Korea's internal document named "oooo"4
(produced in January 2002), and "oooo"(produced in January 22, 2002), the defendants
requested $2,490,000 in first quarter 2002 and total $800 million + alpha in 2002, in
exchange for abandoning the production plan or production of 'Airfox' and 'Leo'." (21p)
“Also, according to the Intel Korea’s internal documents “ooo”, “ooo”, and “ooo,” the
following outcomes are mentioned as main achievements: excluded a competitor-
AMD, hindered AMD’s expansions in the domestic market; AMD’s decreasing
awareness or reputation in the market and within Samsung; Samsung’s
abandonment of AMD CPUs. (25p)

“With providing rebates to Samsung pursuant to the quarterly support plan from first
quarter 2003 to second quarter 2005, as illustrates, the defendants
particularly emphasized that only Intel products should be used and maintained as CPUs
installed in the PCs sold through home-shopping distribution channel and governmental
network (government agency usage) channel, where AMD’s market entry or expansions
were predicted, especially in the low-price PC lines. Consequently, the defendants could
secure the 100% Intel CPU MSS in Samsung.” (26p)


"First of all, involving the 'long term support plan,' according to the defendants’ internal
documents "oooo" (produced in July 19, 2002 produced)Footnote 72, "oooo" (produced in
June 19, 2002) Footnote 73, "oooo" (produced in July 26) Footnote 74, Samsung accepted the
defendants’ 'long term support plan’ in the latter half of 2002, and, as a result, Samsung
promised to cease from purchasing AMD CPUs in both Desktop and Laptop lines" (44p-

“Samsung long term support plan accepted by Samsung!!! We ikl delivered “we’ll do
best” in Q4 but samsung still wants firmed long term commitment. In spite of some
argument in samsung internal, the detail win back schedule on the processing base on DT
drop by July, NB by SEP” (44p-45p)

"Former leader of Sambo's Product-Planning Team ooo stated that defendants requested
exclusion of AMD from the home-shopping channel so Sambo agreed to maintain the
Intel CPUs at 100% level for purpose to receive the maximum-level rebates from Intel.
Also, according to the deposition of Intel Korea’s executive director ooo, the defendants
provided ECAP on the condition that Sambo converted its using CPUs from AMD to
defendants in the home-shopping channel because Intel CPUs’ proportion in the homeshopping
channel was merely 30% at that time, and consequently, Sambo accepted the
proposal." (31p)

“In this context, the defendants requested Sambo several times not to join in the
launching event and not to launch PCs installed with AMD 64 bit CPUs. As a result,
Sambo did not join in the launching event and eliminated its trademark from the
prototype PCs, in which AMD 64 bit CPUs was installed. Since then, Sambo did not
launch or sell the AMD 64 bit CPUs installed PCs more than six months. In return for
this, in third quarter 2003, the defendants provided MDF 3~30 times higher than before
and thereafter quarters, as the illustrates.” (32p)

“The former leader of Sambo’s Product Planning Team ooo and a former executive
director ooo testified that Sambo had intended to join the launching event of AMD
64 bit CPUs. However, as Intel Korea’s director and head, respectively, ooo and ooo
requested Sambo not to join in the event and not to launch AMD 64 bit CPUsinstalled
PCs, Sambo accepted the requests. In return for this acceptance, Sambo
could receive more assistance such as MDF.” (33p)

"The defendants argue that the ECAP was only provided in certain items which were
competing with competitor's products, and the rebates were simply "a certain type of volume discount", in which the amount of rebates is calculated by the purchased volume
of ECAP-applied items.” (35p)
“Reviewing this argument, as the Table 31 illustrates, considering the amount of rebates
actually provided to Samsung and Sambo, we could observe that the rebate rate was in
the lowest level in first quarter 2002 when Samsung rejected the defendants’ request for
abandonment of AMD’s products, despite Samsung's purchase amount of the defendants’
products was in the highest level at the same period. On the contrary, we could observe
that the rebate rate was at the highest level in third quarter 2002 when Samsung stopped
purchasing the AMD’s products, despite Samsung's purchased amount of the defendants’
products was at the lowest level during the same period. This fact resulted from the fact
that the defendants’ rebates had not been provided in pursuant to the amount of partner’s
purchased volume but pursuant to the purchased volume of competitor AMD’s products.
Accordingly, it is appropriate to conclude that the defendants’ rebate program is
totally different from the volume discount scheme which defendants are arguing."

“Consequently, the defendants’ rebate system is not a volume discount program but
a system where the amount of rebates is reduced or increased according to
fulfillment of conditions involving exclusion of competitors, through the
determination of ECAP applied items, amount of discounts, and payment of MDF,
regardless of partner’s purchasing volume. (38p)


Blogger Giant said...

When was Intel going BK again?

5:29 AM, March 15, 2009  
Blogger Sharikou, Ph. D. said...

Intel will BK in 2010 also..

11:03 AM, March 16, 2009  
Blogger James R. Gentile said...

$date += 1
write-host "Intel will BK in $date."

^ Sharikou in MS powershell. :)

9:09 AM, April 04, 2009  
Blogger AubidadedBallad said...

It's preferable on my part to be reading these type of articles... I mean correct me if I'm wrong, reading something like this coming from a person who is well educated on the topic makes it more interesting to read. I can tell you that it is really great that you know your material. Focus on one trade, focus on everything that is tied to it, make a chart of what you need to know. And then, only then will your article come out as great as this one. You can really feel the quality of this article
Samsung Toner Cartridges

12:56 AM, April 29, 2009  

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