9 ms·

The old Intel-Dell arrangement. Here's some cash to shun our rivals.

by maaark 9y ago

Cthulhu_ 9y ago
Was that cash or a discount? Where do you draw the line?
- OscarCunningham 9y ago
  The problem is more the "to shun our rivals" bit.
  - fastball 9y ago
    Right, but if I give a hefty discount to one of my buyers, presumably they'll shun my rivals in exchange for the hefty discount. If that's ok, what's preventing me from locking in the quid pro quo with a 5 year deal?
    - namelost 9y ago
      "Rivals" is just it. The whole point of competition law is to restrict actions which would be legal in a competitive environment but become illegal when a company has a monopoly.
    - Slartie 9y ago
      The point is: the price is not the only factor that matters in a buying decision. Even if you give hefty discounts, thus are the cheapest source for the parts, the buyer might want to source a percentage of parts from another supplier which might be more expensive, but in return the buyer gets some independence from you - like if you can't deliver on an order, the buyer may be able to shift more orders to the other source relatively quickly. And of course the buyer will be in a much better position regarding future price negotiations with you if he already sources the part from two suppliers and thus can potentially increase orders from the alternative source easily (which usually entices them to give the buyer a bigger discount as well) without encountering large additional switching risks. Apple in particular always tries to have multiple sources for any parts they don't develop themselves. And even for the stuff they develop, they try to have multiple manufacturers. This is a very good idea to do at their scale. Them legally preventing from doing this by forbidding it in a contract is way different than "preventing" them from doing this by just offering them chips at super-cheap prices and hoping for them to take up your offering and to ignore all the other competing offers.
      - chris_wot 9y ago
        It works out well for Apple, to be honest. The contact parts that them lock-in in to only one vendor just got nullified. They can now source parts from other vendors if they do choose - something tells me the ramifications of this for Qualcomm are worse than just st the fine... Apple can now do some hard nosed negotiating to reduce the price they pay for Qualcomm goods.
        Slartie 9y ago
        I am pretty sure that the Apple lawyers were absolutely expecting this outcome, which is probably the reason why they signed such a contract. The risk was mostly on Qualcomm's side, as they were the ones writing the shady contract, while Apple would benefit from cheap components, which is a safe benefit that they would not lose in case the shady parts of the contract would come to light and provoke law enforcement to step in. Most likely they didn't yet plan to source the LTE chips from a second supplier at the time they signed the contract, so that limit didn't affect them. Nowadays they do have multiple sources, which is probably why they did not prolong the contract any further after 2016 - because having multiple sources was worth more to them than having this discount.
        mercutio2 9y ago
        The Apple Qualcomm exclusivity agreement expired in 2016. So this doesn’t help Apple at all, except to the extent it sways public opinion on their worldwide litigation over Qualcomm’s sketchy not-really-FRAND approach of charging a percentage of the final device price, rather than a fixed price per chip.
        chris_wot 9y ago
        That’s very interesting, I didn’t know that. What does FRAND mean?
        mercutio2 9y ago
        Fair, Reasonable and Non-Discriminatory. Rights holders generally have to agree to license their patents on FRAND terms to get their technology included in wireless standards, in this case CDMA and LTE. Qualcomm’s license pricing is, unusually in the industry, a percentage of the final retail price of the final device. Apple’s argument is that this is not, in fact, a reasonable and non-discriminatory price for a license to use Qualcomm’s patents.
    - mtgx 9y ago
      Yes, that would be okay, as long as you don't make it part of the contract that "they can't buy from anyone else". You can offer a -50% discount to customers (as long as you aren't selling below cost, which would also be illegal in the EU), and then you'd have to assume that the customer will stick with you as long as you offer that discount, or develop a good relationship, and so on. But you can't enforce that the customer can't also buy the product at 100% of the price or whatever it is from a competitor at the same time it's buying it at -50% from you. If the customer does that, it should be their choice. You can't ban the transactions with your competitors in the deal.
  - VMG 9y ago
    Isn't any competitive offer intended so the customer shuns the rivals?
    - mtgx 9y ago
      Yes, but it's not a legal requirement to shun the competitors. You can still purchase at 2x the price if you want to. That's the issue here. Qualcomm banned Apple from purchasing at any cost from competitors, essentially. It was in the deal that there would be significant consequences from purchasing from other competitors.
      - VMG 9y ago
        thanks for the clarification
- yndoendo 9y ago
  Cash; history of the Intel actions: https://www.youtube.com/watch?v=osSMJRyxG0k https://www.youtube.com/watch?v=osSMJRyxG0k
ams6110 9y ago
What arrangement? I've been able to get AMD CPUs in Dell servers if I wanted them.
- AsyncAwait 9y ago
  https://en.wikipedia.org/wiki/Advanced_Micro_Devices,_Inc._v._Intel_Corp https://en.wikipedia.org/wiki/Advanced_Micro_Devices,_Inc._v.... > In June 4, 2008, Korea Fair Trade Commission fined Intel US$25.4 million for giving Samsung rebates to not use AMD processors. Some of the manufacturers involved in the case were Dell, HP, Gateway, Acer, Fujitsu, Sony, Toshiba, and Hitachi. > In May 2009, the European Commissioner for Competition, Neelie Kroes, fined Intel a record $1.45 billion and ordered it to end its customer rebate program. > In November 2009, Intel agreed to pay AMD $1.25 billion as part of a deal to settle all outstanding legal disputes between the two companies.

The old Intel-Dell arrangement. Here's some cash to shun our rivals.

by maaark 9y ago

The old Intel-Dell arrangement. Here's some cash to shun our rivals.

Cthulhu_ 9y ago

Was that cash or a discount? Where do you draw the line?

OscarCunningham 9y ago
The problem is more the "to shun our rivals" bit.
- fastball 9y ago
  Right, but if I give a hefty discount to one of my buyers, presumably they'll shun my rivals in exchange for the hefty discount. If that's ok, what's preventing me from locking in the quid pro quo with a 5 year deal?
  - namelost 9y ago
    "Rivals" is just it. The whole point of competition law is to restrict actions which would be legal in a competitive environment but become illegal when a company has a monopoly.
  - Slartie 9y ago
    The point is: the price is not the only factor that matters in a buying decision. Even if you give hefty discounts, thus are the cheapest source for the parts, the buyer might want to source a percentage of parts from another supplier which might be more expensive, but in return the buyer gets some independence from you - like if you can't deliver on an order, the buyer may be able to shift more orders to the other source relatively quickly. And of course the buyer will be in a much better position regarding future price negotiations with you if he already sources the part from two suppliers and thus can potentially increase orders from the alternative source easily (which usually entices them to give the buyer a bigger discount as well) without encountering large additional switching risks. Apple in particular always tries to have multiple sources for any parts they don't develop themselves. And even for the stuff they develop, they try to have multiple manufacturers. This is a very good idea to do at their scale. Them legally preventing from doing this by forbidding it in a contract is way different than "preventing" them from doing this by just offering them chips at super-cheap prices and hoping for them to take up your offering and to ignore all the other competing offers.
    - chris_wot 9y ago
      It works out well for Apple, to be honest. The contact parts that them lock-in in to only one vendor just got nullified. They can now source parts from other vendors if they do choose - something tells me the ramifications of this for Qualcomm are worse than just st the fine... Apple can now do some hard nosed negotiating to reduce the price they pay for Qualcomm goods.
      - Slartie 9y ago
        I am pretty sure that the Apple lawyers were absolutely expecting this outcome, which is probably the reason why they signed such a contract. The risk was mostly on Qualcomm's side, as they were the ones writing the shady contract, while Apple would benefit from cheap components, which is a safe benefit that they would not lose in case the shady parts of the contract would come to light and provoke law enforcement to step in. Most likely they didn't yet plan to source the LTE chips from a second supplier at the time they signed the contract, so that limit didn't affect them. Nowadays they do have multiple sources, which is probably why they did not prolong the contract any further after 2016 - because having multiple sources was worth more to them than having this discount.
      - mercutio2 9y ago
        The Apple Qualcomm exclusivity agreement expired in 2016. So this doesn’t help Apple at all, except to the extent it sways public opinion on their worldwide litigation over Qualcomm’s sketchy not-really-FRAND approach of charging a percentage of the final device price, rather than a fixed price per chip.
        chris_wot 9y ago
        That’s very interesting, I didn’t know that. What does FRAND mean?
        mercutio2 9y ago
        Fair, Reasonable and Non-Discriminatory. Rights holders generally have to agree to license their patents on FRAND terms to get their technology included in wireless standards, in this case CDMA and LTE. Qualcomm’s license pricing is, unusually in the industry, a percentage of the final retail price of the final device. Apple’s argument is that this is not, in fact, a reasonable and non-discriminatory price for a license to use Qualcomm’s patents.
  - mtgx 9y ago
    Yes, that would be okay, as long as you don't make it part of the contract that "they can't buy from anyone else". You can offer a -50% discount to customers (as long as you aren't selling below cost, which would also be illegal in the EU), and then you'd have to assume that the customer will stick with you as long as you offer that discount, or develop a good relationship, and so on. But you can't enforce that the customer can't also buy the product at 100% of the price or whatever it is from a competitor at the same time it's buying it at -50% from you. If the customer does that, it should be their choice. You can't ban the transactions with your competitors in the deal.
- VMG 9y ago
  Isn't any competitive offer intended so the customer shuns the rivals?
  - mtgx 9y ago
    Yes, but it's not a legal requirement to shun the competitors. You can still purchase at 2x the price if you want to. That's the issue here. Qualcomm banned Apple from purchasing at any cost from competitors, essentially. It was in the deal that there would be significant consequences from purchasing from other competitors.
    - VMG 9y ago
      thanks for the clarification
yndoendo 9y ago
Cash; history of the Intel actions: https://www.youtube.com/watch?v=osSMJRyxG0k https://www.youtube.com/watch?v=osSMJRyxG0k

ams6110 9y ago

What arrangement? I've been able to get AMD CPUs in Dell servers if I wanted them.

AsyncAwait 9y ago
https://en.wikipedia.org/wiki/Advanced_Micro_Devices,_Inc._v._Intel_Corp https://en.wikipedia.org/wiki/Advanced_Micro_Devices,_Inc._v.... > In June 4, 2008, Korea Fair Trade Commission fined Intel US$25.4 million for giving Samsung rebates to not use AMD processors. Some of the manufacturers involved in the case were Dell, HP, Gateway, Acer, Fujitsu, Sony, Toshiba, and Hitachi. > In May 2009, the European Commissioner for Competition, Neelie Kroes, fined Intel a record $1.45 billion and ordered it to end its customer rebate program. > In November 2009, Intel agreed to pay AMD $1.25 billion as part of a deal to settle all outstanding legal disputes between the two companies.