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Dell prepares for antitrust settlement

Dell prepares for antitrust settlement

Dell has put aside a massive $100 million fund in case it has to settle an antitrust action.

Box shifter Dell has found itself having to put aside a whopping $100 million reserve fund in its latest financial report in order to prepare itself for a possible anti-trust settlement.

According to a report over on Engadget, which quotes Dell's own Financial News page as its source, Dell's move comes as a result of fears that its collaboration with Intel - which saw Dell accept the chip giant's offered rebates in return for refusing to work with other CPU manufacturers including AMD - will come back to bite it in the behind.

With Intel having been fined by the EU and the FTC over its anti-competitive practices, it makes sense for Dell to put some money aside in case the company's competitors decide that the companies accepting the cash to exclude AMD and others from fairly competing should be punished in the same way as the company offering the 'rebates.'

Dell will now be left with a difficult choice: with the fund set aside, it has the opportunity to pre-empt an investigation into its actions by volunteering to pay restitution to those that it has wronged with its actions, which could save it an impressive amount of money in the long term. However, by admitting culpability it can kiss goodbye to the $100 million with no chance of defending itself or reducing the damages in an appeal situation - something that is unlikely to please investors.

Do you believe that Dell should be held culpable for its working with Intel to exclude rivals including AMD from the marketplace, or were its actions simply the result of trying to get the best possible margin for its shareholders and thus beyond reproach? Share your thoughts over in the forums.

22 Comments

Discuss in the forums Reply
tristanperry 15th June 2010, 11:24 Quote
Oh good. Dell are an awful company; decent prices, but rubbish customer service. Have had numerous problems with 2 laptops I bought with them recently (had engineers out 6-7 times in under a year and a half).

So being biased, here's hoping that Dell get nailed with a massive fine. Bigger than $100m, please
blood69 15th June 2010, 11:27 Quote
The tecnology antitrust bull it's so stupit. Anyone remember any car campanie being suited because they used some car part from a specific manufactor and dind't used onother???
If a campany thinks some part or tecnologie is better for it's products why they can't use it???
lacuna 15th June 2010, 11:34 Quote
Dell: "Intel CPU's are better, which is why we used them"

Case closed?
iwog 15th June 2010, 11:46 Quote
Quote:
Originally Posted by lacuna
Dell: "Intel CPU's are better, which is why we used them"

Case closed?

But they're not better in all sectors and this goes back to when X2s where hot sh*t.
eddtox 15th June 2010, 12:23 Quote
Quote:
Originally Posted by blood69
The tecnology antitrust bull it's so stupit. Anyone remember any car campanie being suited because they used some car part from a specific manufactor and dind't used onother???
If a campany thinks some part or tecnologie is better for it's products why they can't use it???

Well, actually it's not. You see, the argument can be made that Dell colluded with Intel by accepting what amounts to bribes in order to stifle out the competition. At the time this was going on Intel's CPU's were not better than AMD's in any way, so AMD's would have been the obvious choice for anyone building a PC.

Knowing this was the case, but not wanting AMD to gain market share Intel used it's considerable cash reserves to entice companies away from using their rival's better product. This not only harmed AMD but also the consumer by fostering a view that Intel was still superior, otherwise why would Dell be using them etc.

As an analogy, say I had been the main manufacturer of bicycles for a long time and you started a company and made better bicycles for less money. Now what if I, seeing this, used my money to bribe retailers not to stock your bikes? Would that not amount to anti-competitive practices, harming both you and the consumer?
Ljs 15th June 2010, 12:32 Quote
This sort of thing is commonplace in business, but not always to this magnitude.

I think the bottom line is that Dell should be able to use what components it likes.

Surely if anything, Intel should be liable and not Dell.

Am I reading this all wrong or something?
blood69 15th June 2010, 12:37 Quote
Quote:
Originally Posted by eddtox
Quote:
Originally Posted by blood69
The tecnology antitrust bull it's so stupit. Anyone remember any car campanie being suited because they used some car part from a specific manufactor and dind't used onother???
If a campany thinks some part or tecnologie is better for it's products why they can't use it???

Well, actually it's not. You see, the argument can be made that Dell colluded with Intel by accepting what amounts to bribes in order to stifle out the competition. At the time this was going on Intel's CPU's were not better than AMD's in any way, so AMD's would have been the obvious choice for anyone building a PC.

Knowing this was the case, but not wanting AMD to gain market share Intel used it's considerable cash reserves to entice companies away from using their rival's better product. This not only harmed AMD but also the consumer by fostering a view that Intel was still superior, otherwise why would Dell be using them etc.

As an analogy, say I had been the main manufacturer of bicycles for a long time and you started a company and made better bicycles for less money. Now what if I, seeing this, used my money to bribe retailers not to stock your bikes? Would that not amount to anti-competitive practices, harming both you and the consumer?

I know the story, AMD already got money and tecnology from Intel and that was a good move from Intel to not pay an even bigger fine. Now if this is an anticompetitive practice (i know it is) look what Apple has been doing in recent years??
eddtox 15th June 2010, 12:39 Quote
Quote:
Originally Posted by blood69
look what Apple has been doing in recent years??

What do you mean?
blood69 15th June 2010, 13:13 Quote
Quote:
Originally Posted by eddtox
Quote:
Originally Posted by blood69
look what Apple has been doing in recent years??

What do you mean?

They are doing things they're way while Google and Microsoft have to obey to rules, in other point of view its an "anticompetetive practice" or simply isn't fair...
How can Apple sue every one the way they are doing?
What is the real reason why they don't use flash tecnology? or its just because the HTML 5 is coming???...
Remember when the iPod came out had the same OS interface of the Creative Zen, they paid a miserable fine and get way with it??
Stotherd-001 15th June 2010, 14:28 Quote
And when Apple went with Intel in the first place was when AMD was ahead in that sector... Plus they're never offered an AMD alternative, unlike Dell.
eddtox 15th June 2010, 14:42 Quote
I think Apple got away with a lot in the last few years simply because they were 'the only credible to microsoft' and everyone was too busy with MS antitrust cases.

However, now that Apple has officially overtaken ms, we might start seeing some pressure on them.

As for apple suing people left right and centre - unfortunately, we have created a legal and social environment where not only is that possible and acceptable, it works, too.
Skiddywinks 15th June 2010, 15:31 Quote
Quote:
Originally Posted by Ljs
This sort of thing is commonplace in business, but not always to this magnitude.

I think the bottom line is that Dell should be able to use what components it likes.

Surely if anything, Intel should be liable and not Dell.

Am I reading this all wrong or something?


Sure, they can use any components they like in their products, but the fact is they accepted bribe money to use inferior components in their products. If you ask me, Dell should get fined even more than Intel. Intel screwed over AMD, but Dell screwed over anyone buying one of their PCs, and helped Intel screw over AMD.
javaman 15th June 2010, 16:01 Quote
Its my business, I done what was best for my business by going with the company that offered the best deal. Isn't that the point of business? Stupidly over simplified I know but meh, I honestly couldn't care. Depends how the money is used really.
blood69 15th June 2010, 16:49 Quote
Quote:
Originally Posted by javaman
Its my business, I done what was best for my business by going with the company that offered the best deal. Isn't that the point of business? Stupidly over simplified I know but meh, I honestly couldn't care. Depends how the money is used really.

Amen to that
Altron 15th June 2010, 17:18 Quote
Meh, I don't necessarily agree with what Dell did, and I am not a fan of Dell. They do a bunch of BS (or at least they used to) with swapping the pins in the ATX connector, so Dell PSUs only work with Dell mobos and vice-versa. I had a P4 Williamette core 1.6GHz back in the day (yeah, I've been on bit-tech for almost 8 years), and the mobo failed. Had to pay like $150 for them to ship me a new one (which I installed myself, it's not like that included any labor) at a time when a vanilla Intel-branded 845 chipset board was like $60. Was like a month out of the 1 year warranty, too.

Anyway, I'm rambling.

This sort of a thing is common, but usually not on as large of a scale. Easiest example I can think of is soft drink companies at food service companies. When a restaurant or cafeteria makes a deal with a drink vendor, usually part of the deal is that they will ONLY serve drinks from that vendor. There are a few exceptions, but 90% of restaurants serve either all Coke products, or all Pepsi products. I would assume that there is some sort of financial incentive offered by each vendor to a customer that is willing to buy exclusively from that vendor (otherwise why would they?) but that's just speculation on my part.

Either way, there are definitely some agreements I've seen in other industries where companies will 'partner' and exclusively distribute their partner's products and not their competitors, but I'm not sure if there was a financial incentive or not.

And yes, it's as easy as saying that Intel is better than AMD, or vice-versa. There have been many flips. Back in the day, Athlon XPs were much faster than Pentium 4s, and overclocked better, and could unlock their multipliers by using a pen on the chip. Then Hyperthreading came out, and the focus switched back to Intel. Then AMD got 64-bit first, and the Athlon 64 was the best. Then AMD had dual-core first, and it was firmly in the lead. Then Intel came out with Core 2 Duo, and took it back. Again, I'm rambling, but Intel's current dominance is a relatively recent development, and Dell has been Intel-exclusive through those days of AMD superiority.
blood69 15th June 2010, 17:50 Quote
Quote:
Originally Posted by Altron
This sort of a thing is common, but usually not on as large of a scale. Easiest example I can think of is soft drink companies at food service companies. When a restaurant or cafeteria makes a deal with a drink vendor, usually part of the deal is that they will ONLY serve drinks from that vendor. There are a few exceptions, but 90% of restaurants serve either all Coke products, or all Pepsi products. I would assume that there is some sort of financial incentive offered by each vendor to a customer that is willing to buy exclusively from that vendor (otherwise why would they?) but that's just speculation on my part.

Never came thru my head, but that is the best and simple example of whats going on and its the end of it. If Dell is sued all restaurants and cinemas should be to.
"anticompetetive practice" yea right, is been like that since the stone ages.
HourBeforeDawn 15th June 2010, 18:40 Quote
Couldnt have happened to a crappier company. I hope they get hit far more then the 100mil they set a side.
lp1988 15th June 2010, 19:13 Quote
Quote:
Originally Posted by Altron
This sort of a thing is common, but usually not on as large of a scale. Easiest example I can think of is soft drink companies at food service companies. When a restaurant or cafeteria makes a deal with a drink vendor, usually part of the deal is that they will ONLY serve drinks from that vendor. There are a few exceptions, but 90% of restaurants serve either all Coke products, or all Pepsi products. I would assume that there is some sort of financial incentive offered by each vendor to a customer that is willing to buy exclusively from that vendor (otherwise why would they?) but that's just speculation on my part.

One of the main reasons for this is that these restaurants have a limited amount of storage space, and in order to get the deals you have to by a certain quantity. most simply doesn't have the space/turnover required to have several brands.
At least that is the reason where I work. and some larger places does have both Pepsi cola and Coca cola.
Xir 16th June 2010, 16:33 Quote
Quote:
Originally Posted by eddtox
Well, actually it's not. You see, the argument can be made that Dell colluded with Intel by accepting what amounts to bribes in order to stifle out the competition. At the time this was going on Intel's CPU's were not better than AMD's in any way, so AMD's would have been the obvious choice for anyone building a PC.

Knowing this was the case, but not wanting AMD to gain market share Intel used it's considerable cash reserves to entice companies away from using their rival's better product. This not only harmed AMD but also the consumer by fostering a view that Intel was still superior, otherwise why would Dell be using them etc.

As an analogy, say I had been the main manufacturer of bicycles for a long time and you started a company and made better bicycles for less money. Now what if I, seeing this, used my money to bribe retailers not to stock your bikes? Would that not amount to anti-competitive practices, harming both you and the consumer?

Bravo, one of the best to understand summaries of this issue i've heared in a long time ;)
RichCreedy 16th June 2010, 21:10 Quote
i thought that intels offer made sound business sense, offer a rebate for increased sales, but the offer has to have some rules, nothing wrong with that.

dell didn't have to take the offer, but they would have had to pay the standard price.
eddtox 16th June 2010, 22:37 Quote
Do we know exactly what the offers were? It would be very easy for intel. as the industry's biggest player to put unfair pressure on dell.

OTOH, I doubt it was just a rebate as that wouldn't stop dell from stocking amd's offerings. It sounds more like an exclusivity deal.
Abdul Hadi 17th June 2010, 07:44 Quote
AMD might not be the best right now but that is also the main reason because Intel kept giving money and making more of it.
like

Paying for the R&D of new projects.
Prohibiting the other vendors from using their products. etc.

and what not.

That may be business but in my opinion not fair. AMD had been a rival and I mean, a good one. Still in effort to take the competition to avoid monopoly. I've been an Intel fan and still am but fair practices should be promoted and the unfair should be declined. So if DELL is among the one promoting it, then so be it.
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