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NVIDIA under fire for anti-competitive and price fixing business practices

Analysts expect a stormy summer as NVIDIA faces not one, but fifty-one pending lawsuits. The 51 civil complaints filed against NVIDIA claim that the company participated in anti-competitive business agreements and price fixing strategies. Some of these civil suits allege that NVIDIA entered into these agreements with graphics rival AMD.

In March 2007, 42 civil suits were filed against NVIDIA for anti-competitive business practices; 14 of those suits alleged that the company colluded with AMD to fix prices. According to NVIDIA, most of the suits were filed in the Northern District of California. NVIDIA states that while there appear to be many civil suits, all of the suits are putative class-actions, indicating that they are from direct or indirect purchasers of NVIDIA graphics products.

Price fixing occurs when a company enters an agreement with its competitor to set a minimum selling price for a particular product or family of products. In this case, many of the suits allege that AMD (then ATI) and NVIDIA artificially inflated the value of high-end and enthusiast components.

Currently there is roughly an even-split in market share between AMD and NVIDIA, with NVIDIA holding 28.5% of the graphics market and AMD picking up another 23%.  AMD saw the biggest loss last year with the introduction of NVIDIA's G80-family GPUs -- the company's high-end GPU.

Late last year AMD and NVIDIA received subpoenas from the U.S. Department of Justice alleging that both companies violated antitrust laws. The suit was sparked after AMD's acquisition of ATI was approved, which lead to the belief that NVIDIA had somehow cooperated with AMD in regards to the acquisition. The fact that AMD and NVIDIA are long time partners also sparked debate, but the U.S. Department of Justice did not reveal any specific allegations against AMD, ATI or NVIDIA.

Along with the U.S. Department of Justice, Intel also issued subpoenas against AMD and ATI, requesting that all documents related to the AMD-ATI merger be reviewed. Intel, also under anti-trust litigation with AMD, was unsuccessful in lobbying for further sanctions. AMD successfully absorbed ATI last year.

AMD senior executives indicated last year that even with ATI under its wing, it will still be cooperating, while simultaneously competing, with NVIDIA for the foreseeable future.

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Can't have it both ways
By James Holden on 5/28/2007 3:52:43 PM , Rating: 5
NVIDIA is a chipset supplier for AMD
AMD is a chipset supplier for AMD
NVIDIA is a chipset supplier for Intel
ATI (well AMD) is a chipset supplier for Intel
Intel is a chipset supplier for Intel

Oh sweet irony. If only Intel supplied chipsets for AMD boards, then the circle would be complete.

Of course they colluded on prices. They have to figure out some way to get us saps to pay $600 for a video card.




RE: Can't have it both ways
By Dactyl on 5/28/2007 4:50:56 PM , Rating: 5
There is no direct collusion. They don't need to meet up and discuss this. Each can see the other's public actions. They can cooperate to set prices without ever meeting or shaking hands.

The government should stay the hell out of this, even if they are jacking up prices. The point of government intervention is to protect consumers. We don't need protection from AMD or NVidia. They are making new and innovative graphics cards on a yearly basis. Allowing them to make extra profits (if that's even what they're doing) is a good thing, because it lets them pump more money into R&D. I think it just makes sense to charge high prices for the cards to support their R&D, and it's not the result of a conspiracy to gouge people.

Businesses are allowed to release limited edition versions of things. The 8800 Ultra is based on entirely new silicon. That's not easy to do. NVidia should be able to charge more for it.

Further, graphics cards are a risky venture. Look at AMD's R600. By all accounts, it's a flop. AMD is going to lose a lot of money because they took a risk and blew it. Making fat profits in the years when everything goes right is natural, because they have to offset potential loser years (remember the FX 5900?)

Even assuming you could drop the price of graphics cards in half, if it meant slowing down R&D, customers would have less value in the long run. It would mean slowing down R&D by at least half. Do you want to wait two years for the 9800 series cards to be released, or do you want them in December '07?

There is already a graphics card company focused on delivering low-priced chipsets: Intel. And we ABSOLUTELY HATE their integrated graphics. Don't tell me you want to make AMD and NVidia more like Intel when it comes to graphics!


RE: Can't have it both ways
By tgc2100 on 5/28/2007 6:22:45 PM , Rating: 3
on adding to that, I'm not an ATI fanboy or anything. Even CPUs I go with where ever the performance is. AMD before, and now the Core2. But as for this generation of graphics cards people are benchmarking them with DX9 games and they are DX10 graphics cards. Yea, they have to play older games, but I'm curious to know how they are handling the DX10 games and compare them that way. Especially since that's where the future of gaming is going.


RE: Can't have it both ways
By XesBOX on 5/29/2007 9:57:43 AM , Rating: 4
Wow.. If I've never seen a devil advocate until now..

There are things called 'laws'. Silly little things that are put in place (in theory) to protect people from themselves. In this case, it's to protect people from saying, 'Hey, I can rationalize this as OK.' much as you have done.

Shady and unfair business practice is just that, shady and unfair. Nvidia's top people already had issues in 2000 and 2001 with insider trading. If you can't grasp the reason these things are illegal in the first place then you have no business adding your rhetoric to the discussion. Regardless of how 'bad-ass' any given graphics card is, fact remains that when competition between business is nullified, the CUSTOMER looses. -ALWAYS-


RE: Can't have it both ways
By masher2 (blog) on 5/29/2007 1:33:27 PM , Rating: 4
> "Shady and unfair business practice is just that..."

One such common practice is the filing of a civil suit intended simply to chase dollars, not justice. And, until or unless any specific evidence arises against Nvidia, I think we should consider these civil suits as no more than that.


RE: Can't have it both ways
By XesBOX on 5/30/2007 2:58:32 PM , Rating: 1
I whole heartedly agree, but when talking about which is darker, the pot or the kettle, I'd have to say that companies in general have been robbing from the consumers since the dawn of commerce.

Greed in and of itself will never go away, but the difference between 'us' and 'them' is that we don't walk away with a couple extra Yatchs and a nice new Ferrari in addition to the 250 thousand dollar bonus I gave myself for a job well done. And considering the not-so-recent happenings with Enron and how it single handedly ruined the lives of about 14 THOUSAND people in one fucked up move.. well.. you'll have to excuse me and all the other people who are a little less trusting of companies' business practices.. because, in the end, it should *absolutely* concern us.

If people, in one way or another, with or without the help of equally shady lawyers, do not keep corperations in check (because we all know the government will over look baby seal clubbing until a dead seal is lying on their porch) then no one will.


RE: Can't have it both ways
By Oregonian2 on 5/29/2007 1:49:06 PM , Rating: 4
Things usually aren't always so clear cut and laws tend to be oxymoronic sometimes. Laws want competition, but its not legal to see what one's competitor prices things at and make decisions on how to react -- because that's collusion. One can only properly compete without knowledge of competitor pricing. Which really isn't competing. Now, I've fudged and simplified things in my comment above, so don't jump on the details, my point is that there's a wide range of what's what in law and in business practice and how things are applied makes a big difference between application of law being justice or stupid-lawyers, it's not all clear cut. Especially when a company's partner (nVidia) is one that a company's livelyhood (AMD) depended upon to make associated chips gets into a awkward position when AMD buys their rival (who I never liked, btw, buying nVidia would have better if it weren't for the cost). There are the dynamics of going from one state of association to another.

As to pricing, one could say they agreed to sell their high end video boards at a high price -- or you could say "the other guy is pricing theirs high, so we can get away with pricing ours high and not get slaughtered". The first is illegal, the second is just competition (you want the highest price you can get and have your goods still be bought). But they're both the same action just looked at differently .


RE: Can't have it both ways
By masher2 (blog) on 5/29/2007 3:44:07 PM , Rating: 6
As Rand once said, we've made it illegal for a company to price their products above their competitors (gouging), illegal for them to price below their competitors (dumping), and illegal for them to price them the same (price fixing).

Doesn't leave much room to avoid breaking the law. At times, no room at all.


RE: Can't have it both ways
By rcc on 5/30/2007 5:56:51 PM , Rating: 2
quote:
One can only properly compete without knowledge of competitor pricing. Which really isn't competing.


Not true. Happens all the time, legally. It's one of the ways you get a price war. You see their price, you lower yours a bit. Everyone's happy. Or, you see their price is 25% higher than yours, so you raise your's 20%. Not so happy, but still legal.

The problem is when you go to the other guy and say "hey! This crap is cutting into my profits, what say we don't drop below $xx amount". That is a problem in law and competition.


RE: Can't have it both ways
By Oregonian2 on 6/4/2007 7:11:24 PM , Rating: 2
quote:
Not true. Happens all the time, legally. It's one of the ways you get a price war. You see their price, you lower yours a bit. Everyone's happy. Or, you see their price is 25% higher than yours, so you raise your's 20%. Not so happy, but still legal.


But that's the problem. If you do that and don't undercut the competitor, you're price fixing and in bed with that competitor. That's what they're talking about with Nvidia and ATI.

So you either go into a price war until you go bankrupt and the other guy gets attacked for monopolistic activities (afterwards), or you're both attacked for getting in bed with one another.

Great choice, eh?

P.S. - And no, you can't raise your price by 20% as you say, that'd REALLY get you into trouble for colluding with the enemy and coming up with a fixed price together -- and your joining them in the higher price would be "proof". Mind you, I think this is all silly to some extent because the real competition depends upon what the buyers do (like not buying either) -- but what I say above is what the media powers (and blogs) would be shouting (and there would be "investigations" announced, of course). Results of investigations usually don't get reported though -- unless it's against Microsoft.


By hannibal da mekanikabull on 5/29/2007 9:10:27 PM , Rating: 2
Laws regarding insider trading are good laws, but anything that incriminates a company for charging high prices is pretty rediculous. If you dont think its worth the money dont buy it, its that simple.


RE: Can't have it both ways
By Gneisenau on 5/30/2007 12:39:22 PM , Rating: 2
For there to be price fixing, doesn't there need to be at least 2 companies involved? How can they claim nVidia is guilty of price fixing and not include ATI, Intel, Matrox or whomever they were supposed to have fixed prices with in the suit?


RE: Can't have it both ways
By InsaneGain on 5/29/2007 6:18:21 PM , Rating: 2
Apparently you never took any economics courses. Your arguments that the higher prices resulting from "cooperation" allow more R&D that is beneficial for all are completely invalid. Unimpeded competition is the lifeblood of a free market economy, and anything that hinders it will always result in misallocation of resources and higher costs for society in general.


RE: Can't have it both ways
By masher2 (blog) on 5/29/2007 7:17:45 PM , Rating: 2
> "anything that hinders [competition] will always result in misallocation of resources and higher costs for society in general..."

Quite true. However, there are a large number of economists who believe that anti-trust legislation is actually a hindrance to unimpeded competition.


RE: Can't have it both ways
By nanokompressor on 5/30/2007 2:53:17 PM , Rating: 2
And in your economic courses I'm pretty sure you remember that in the long run firms enter the market when percieved economic profit in addition to normal accounting profit exists. Nvidia's and ATI's profit margins won't last forever. Intel is getting in the graphics business too. The market will work itself out as long as the government stays the hell out.


RE: Can't have it both ways
By Samus on 5/30/2007 1:44:08 AM , Rating: 2
How many OEM Intel PC's have Intel chipsets?

Most of them, with a few nVidia here and there.

How many OEM AMD PC's have AMD chipsets?

Virtually none of them. They're all nVidia.


This is stupid
By Belard on 5/28/2007 8:11:55 PM , Rating: 5
Oh yeah, Nvidia & ATI(AMD) made people spend $600~1200 for graphics cards. What a load of bull!

Everyone KNOW that the TOP END parts are expensive... and if intel wants to join in (making things worse) then *WE* can sue Intel for making $1000 QuadCore CPUs, when they should be introduced to the market for $100! yeah, that sounds fair! What about M$, charging $400 for a super-bloated VISTA, lets sue them for selling an OS! (M$ should be sued for not supporting DX10 on WinXP)

Hell, LETS SUE Ferrai for making their $300,000 cars so expensive! I should be able to get an F40 for $15,000!

Both AMD & Nvidia sell graphic systems/cards for $25~500+ Most people do NOT need a $500 video card... If nobody wants to spend $500 on a card, then we won't see such things.

I support AMD/Nvidia right to design the best they can, and if its $500~600 a card (Remember the junky fx5800!!) - so be it! Because 1-2 years later, that same $500 card is $150.

2004: The ATI 9800XT and GF 5950 Ultra were $500 video cards.
2006: The Smaller & cooler runing GF 7600GT goes for $125 and is 3 times faster.




RE: This is stupid
By iVTec on 5/28/07, Rating: -1
RE: This is stupid
By Treckin on 5/29/2007 1:31:06 AM , Rating: 2
before you post, beneath every post is a WORTH READING/NOT WORTH READING button... the rest is self explanatory.
Once you post, you may not vote any longer.
This is in a effort to make people read the whole comments section before posting something stupid...
Obviously they need more precautions