EU Fines Intel $1.45 Billion in New Antitrust Battle

Intel was accused of using illegal loyalty rebates in order to squeeze rivals out of the market for computer processing units.

Claiming it uses its stranglehold on the microchip market to crush its main rival illegally, the EU antitrust regulators fined Intel a record 1.06 billion euros (US$1.45 billion) on May 13.

The European Commission, Europe's top competition watchdog, accused Intel of using illegal loyalty rebates to squeeze rivals out of the market for computer processing units -- the brains inside personal computers.

The company hit back promising to fight the ruling with an appeal in EU courts, raising the specter of a new antitrust saga between Brussels and a U.S. technology giant after Microsoft's years of European legal battles.

The Santa Clara, Calif.-based company dominates the 22-billion-euro (US$30 billion) market for x86 CPUs with a 70% share during the more than five years it was accused of breaking EU antitrust rules.

"Intel has harmed millions of European consumers by deliberately acting to keep competitors out of the market for computer chips for many years," EU Competition Commissioner Neelie Kroes said. "Such a serious and sustained violation of the EU's antitrust rules cannot be tolerated," she added.

The commission said that Intel had used wholly or partially hidden rebates to get PC makers such as Acer, Dell, HP, Lenovo and NEC to buy all or almost all their CPU supply from Intel instead of rival Advanced Micro Devices (AMD).

"Naturally, the Commission favors strong, vigorous price competition, including by dominant firms," Kroes said. "However, Intel went beyond normal price competition by giving rebates to computer manufacturers on the condition that they bought all, or almost all, of their CPUs from Intel."

EU antitrust regulators also accused Intel of paying computer manufacturers to halt or put off the launch of products containing microchips competiting with Intel's x86.

In addition, Intel allegedly paid a major electronic retailer, chain store MediaMarkt, to stock computers with its chips.

The commission ordered Intel to cease any of the ongoing practices that it deemed to break EU rules.

Intel did not hesitate to contest the commission's ruling. "We believe the decision is wrong and ignores the reality of a highly competitive microprocessor marketplace," Intel CEO Paul Otellini said. "There has been absolutely zero harm to consumers. Intel will appeal."

Intel's fine topped the previous record 899 million euros Microsoft was ordered to pay last year for failing to cooperate with the European Commission in its antitrust battles with the software giant. However, Microsoft has accumulated a total fines of 1.676 billion euros in fines and its antitrust struggle with Brussels is still ongoing.

EU regulators have been investigating Intel since it received complaints from AMD back in 2000 and filed formal antitrust charges against the company in July 2007 and then again in July 2008. "The EU decision will shift the power from an abusive monopolist to computer makers, retailers and above all PC consumers," said AMD president for Europe, Middle East and Africa Giuliano Meroni.

The commission fines could be only the beginning of Intel's woes, with the BEUC European consumer-protection association calling for a class action suit against the company to seek compensation. "For BEUC, Intel should be liable to compensate the victims of its illegal practices," its director general Monique Goyens said. "Consumers have been paying too much for their computers and they should be compensated."

Copyright Agence France-Presse, 2009

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