Monday, May 11, 2009

Intel guilty -- findings by KFTC

The KFTC held a full-member committee on June 4, 2008 and decided to impose a corrective order and surcharges against abusing market dominance by 「Intel Corporation, Intel Semi-conductor and Intel Korea (Hereinafter referred to as “Intel”). To eliminate AMD, a rival company, from the CPU market using its dominant market power, Intel provided rebates to Samsung Electronics and Sambo Computer ranked 1st and 2nd in the domestic PC market on the condition that they would not purchase CPUs manufactured by AMD.

In May 2002, Intel agreed to provide rebates to Samsung Electronics on the condition that it suspend the purchase of CPUs made by AMD. In connection with this, Samsung Electronics in effect suspended the purchase of AMD CPUs starting in the 4th quarter of 2002, and received various amounts of rebates until the 2nd quarter of 2005 on the condition that they purchase only CPUs made by Intel.

During the period from the latter half of 2003 to the first half of 2004, Intel provided rebates (approximately $2,600,000 USD) to Sambo Computer (ranked 2nd in Korea) on the condition that it convert the company from which to purchase CPU from AMD to Intel for the Home Shopping channel sales. In September 2003, Intel, using market dominance and rebates, interfered with local marketing of 64 bit AMD-based CPU for desktop computers from Sambo Computer’s.

Such acts of providing rebates to customers on the condition that they would not deal with rival companies constitute a violation of Article 3-2 (1) 5 of the Monopoly Regulation and Fair Trade Act.

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When the market share of AMD increased, Intel provided new rebates to PC makers and the market share of AMD dropped again. During the period from 2000 to 2006, AMD’s market share stood at 10% or less in most cases, and even its highest market share was only 17%.
However, in the CPU sales agent market where the consumers’ preference is directly reflected, AMD’s market share increased during the period from 2000 to 2005, and the market share went up as high as to 30% at the end of 2005. The KFTC started investigating this case in June 2005 and it took 3 years of thorough investigation and discussions with domestic and foreign economists and jurists before a final decision was made.

Intel’s action has forced domestic PC manufacturers to buy only the expensive CPU supplied by Intel, causing domestic consumers to purchase PCs at higher prices. In addition, it has reduced the purchasing options for PC consumers who prefer AMD CPUs.

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