EU fines Intel $1.45 billion

The EU ordered the world's biggest computer-chip maker to stop illegal sales tactics that shut out its Silicon Valley rival AMD.

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May 14, 2009 07:31
2 minute read.

The European Union fined Intel Corp. a record €1.06 billion ($1.44b.) on Wednesday, ordering the world's biggest computer-chip maker to stop illegal sales tactics that shut out its Silicon Valley rival AMD. The fine exceeded a €899 million monopoly-abuse penalty for Microsoft Corp. last year. Intel called the decision "wrong" and said it would appeal to an EU court within 60 days. Santa Clara, California-based Intel has about 80 percent of the world's personal-computer microprocessor market. It faces just one real rival, Advanced Micro Devices Inc., located a few kilometers away in Sunnyvale. Wrapping up an eight-year probe, the EU said Intel had given rebates to manufacturers Acer, Dell, HP, Lenovo and NEC for buying all or almost all their x86 computer processing units, or CPUs, from Intel and paid them to stop or delay the launch of personal computers based on AMD chips. "Given that Intel has harmed millions of European consumers by deliberately acting to keep competitors out of the market for over five years, the size of the fine should come as no surprise," said EU Competition Commissioner Neelie Kroes. "Intel did not compete fairly, frustrating innovation and reducing consumer welfare in the process," she said. The decision does not affect Intel's pricing strategy outside Europe. But it could have an important knock-on effect on Intel's sales practices in the United States and in Asia if regulators there follow the EU lead. The European Commission said the discounts weren't in Intel's official contracts because the company "went to great lengths to cover up many of its anticompetitive actions." Officials said their case is largely based on e-mails and statements from businesses, some seized during surprise raids. According to Intel general counsel Bruce Sewell, this is "weak evidence" and regulators were drawing unfair inferences from a small number of documents. He said the concept that rebates could damage competition was an area "where the law is now in flux" and regulators were testing the boundaries. The European Commission also told Intel to immediately cease some sales practices in Europe but refused to say what those were. Intel said it was "mystified" about what it was supposed to change but would comply with the "extremely ambiguous" EU order. EU regulators said they calculated Intel's fine - 4% of last year's $37.58 billion sales worldwide - on the value of its European chip sales over the five years and three months that it broke the law. Europeans buy some 30% of all computer chips sold every year. AMD's European president Giuliano Meroni said the EU decision would shift power "from an abusive monopolist to computer makers, retailers and above all PC consumers." European consumers group BEUC welcomed the fine and urged customers to seek damages in civil courts. The manufacturer rebates started in 2002, the EU said, with most ending in 2005 - apart from a 2007 deal for one unidentified company to only source notebook computer chips from Intel.


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