Brian's Brain

Schadenfreude. Familiar with the term? Here's the first few lines' worth of the Wikipedia's entry:

Schadenfreude...is pleasure derived from the misfortunes of others. This German word is used as a loanword in English and sometimes in other languages. Philosopher and sociologist Theodor Adorno defined schadenfreude as “largely unanticipated delight in the suffering of another which is cognized as trivial and/or appropriate.”

I most recently encountered the term in direct use in an episode of Boston Legal. And I've recently (and repeatedly) been thinking of the term as I hear about Intel's treatment at the hands of the EC (European Commission) and (specifically) see how the EC's decision is portrayed by the so-called 'new media'.

As many of you may have already heard (and if not, here's some real coverage from EDN's Suzanne Deffree) Intel was penalized in mid-May with a $1.4B USD (€1.06 billion) fine from the EC, for alleged anticompetitive activity during the years 2002-2005 when Intel's Pentium 4 (i.e. NetBurst microarchitecture)-centric product line was particularly uncompetitive versus AMD's Athlon alternatives. The EC claimed that Intel had alternatively maintained its dominance via volume sales rebates to customers, thereby precluding AMD from growing market segment share. Specifically, quoting Ars Technica:

The Commission has concluded that Intel paid one manufacturer to delay the release of AMD business desktops, keep them from being sold through distributors, and block their sales to enterprise customers. Two other OEMs were paid to delay the introduction of AMD-based notebooks. The retailing chain MediaMarkt was also paid to keep AMD computers off its shelves.

Although Intel is appealing the ruling, company officials admit that the likelihood of overturning the decision is remote, and the company's most recent Q2 earnings report incorporates the fiscal impact of the fine.

Sounds pretty damning, doesn't it? Only problem; it's only one side of the story. At the time the ruling was announced, here's what CEO Paul Otellini said:

Intel takes strong exception to this decision. We believe the decision is wrong and ignores the reality of a highly competitive microprocessor marketplace – characterized by constant innovation, improved product performance and lower prices. There has been absolutely zero harm to consumers.

In a follow-up telephone briefing captured by Betanews, here are some particularly relevant comments by Scott Fulton, including quotes from Otellini:

Intel CEO Paul Otellini suggested that the EC investigators essentially saw what they wanted to see, and by overlooking key facts, ignored the basic principles by which the computer product market operates in Europe. Without saying so in explicit language, and without naming any of Intel's own customers, Otellini adeptly countered that the business environment that leads to exclusivity deals was set up by those customers. Specifically, he did say that manufacturers auction off their sales, and the winner of those auctions effectively cancels out the loser, achieving exclusivity by default.

"On occasion, we'll sell a combination of microprocessors and other chips at a price which is more favorable than if people bought the products independently," Otellini told reporters. "They have the right to buy the products independently, they have the right to mix-and-match products. But we believe that, relative to our CPU chipset pricing, there's no harm nor foul there. On the rebates, it's a simple volume discount kind of environment. We bid for business under a number of conditions, some of which are trying to meet competition. Our customers put business up for bids, we bid on it, AMD bids on it, and when you have a market which is principally supplied by two players, when one company wins, the other, by definition, will lose the business. And so I think this is really just a matter of competition at work, which is something I think we all want to see, versus something nefarious."

Otellini later went on to describe customers -- presumably including Acer, Dell, HP, Lenovo (the PC market successor to IBM), and NEC -- as being particularly savvy market players who set up the conditions for the market in which AMD and Intel both play. By implication, he said that if any of these customers end up buying 80% or more of their CPUs from Intel, it's because it wanted to, and because that much of its business was up for bids. Notice, the CEO commented, that none of the manufacturers named by the European Commission this morning were actually complainants in the case.

And now, as it turns out, Intel's not the only one criticizing the EC's decision-making criteria. The Commission's own ombudsman is weighing in, specifically pointing out that any record of a particularly critical meeting between the EC and Dell (in which the latter was reportedly quite critical of AMD products' capabilities) has vanished. But to the title of this post, the media pick-up of this latest twist in the story has been muted at best. More generally, as the saga of Intel-vs-the EC has played out to date, a notable and consistent anti-Intel coverage bias has emerged. Apparently, when you're big, it's somehow rationalized as being more acceptable than usual to knock you down a peg or few, even if it's done in an unfair fashion.

Note that the EC is not a criminal court, complete with a jury of peers. It's an administrative body, whose forum provides accused companies with limited-at-best abilities to defend themselves or to challenge its rulings. There's no means by which questions about the impartiality and transparency of the EC's investigators can be seriously investigated. And ironically, the recent comments of the ombudsman (who acts only as an advisor; this individual has no true power in the organization) may only harden the EC's stance, to Intel's detriment on appeal.

So why would the EC, consciously or not, weigh in on AMD's side? Consider, first and foremost, the economic crisis still gripping that Continent (as is the case both here in the States, and elsewhere around the world). As one commenter noted:

The billions of fines that the EU has been placing goes directly to the tax budget and is used for agriculture, infrastructure and other internal expenses.

Short on cash; fleece a big company or few? Perhaps. It might also explain the EC's latest antitrust pursuit of Microsoft, which I've been watching with a mix of bewilderment and amusement. The EC recently decided that it wanted Microsoft to provide the capability for multi-browser (i.e. not just IE) initial installations on computers. Microsoft's response, that it'd ship a browser-less version of Windows 7 in Europe (unlike with past Windows versions, IE is not a core component of Microsoft's latest O/S), thereby enabling OEM's to include in their manufacturing software builds whatever browser they wished, was bafflingly still deemed unacceptable. The EC, believe it or not, wanted Microsoft to bundle not only its own browser but that of Microsoft's competitors within Windows 7, and to provide an initial setup screen that'd enable users to select competitors' browsers. And Microsoft eventually blinked and acquiesced to the EC's demands...which doesn't at all mean that the EC was right, mind you, just that Microsoft didn't want to further delay Windows 7 shipments in Europe, and therefore chose the lesser of two evils.

The subject of competition brings up another possible reason for EC bias in favor of homegrown companies. Note, for example, that several large Linux suppliers are Europe-based, as is Symbian (the Nokia-championed O/S for mobile phones), and that Apple (OS X) and Sun (Unix) are particularly successful in the European market. Note, too, that perpetual underdog browser company Opera hails from Norway. Turning the attention to semiconductors, it's hard to ignore that the former AMD manufacturing facilities now owned by foundry spin-off Globalfoundries (still largely influenced from a financial standpoint by AMD) are based in Dresden, Germany. And plenty of other European-housed semi firms could benefit, either indirectly or directly, from a short-term fiscal 'spank' and long-term reputation stain of Intel.

Intel and Microsoft are widely known as being aggressive defenders of existing businesses and aggressors when pushing into new ones. These approaches are one notable reason (among others) why they've been so successful in their respective markets. Does this behavior sometimes cross the line into inappropriate actions that unfairly hamper competition, whether done by low-level sales people or approved by the highest levels of corporate management? Perhaps: if so, it should be squelched in a timely and effective fashion. But such analysis and conclusions should be undertaken in a fair and transparent manner, not by a secretive ruling body with questionable motivations. And until the story fully plays out, we in the media also have an obligation to report it in an equally unslanted fashion.