EC fines Intel $1.44 billion in antitrust case

Chip maker will appeal, says it takes 'strong exception' to the ruling

BRUSSELS - The European Commission today found Intel Corp. guilty of antitrust violations in the market for PC microprocessors and fined the chip maker €1.06 billion ($1.44 billion U.S.).

Competition Commissioner Neelie Kroes said the antitrust action is primarily designed to protect consumers. "Intel has harmed millions of EU consumers," she said, adding that the large fine should "therefore come as no surprise." The EC is the executive arm of the European Union and its top antitrust authority.

The main antitrust abuses involved paying rebates to system manufacturers and to Europe's largest IT retailer, Media Markt, in order to shut out Intel's closest rival, Advanced Micro Devices Inc. Although the rebates resulted in a reduction in retail prices, Kroes said that the harm to consumers stems from their not getting the choice of computers that they would have if AMD hadn't been suppressed.

Intel plans to appeal the ruling and takes "strong exception" to the commission's decision, Intel President and CEO Paul Otellini said in a statement. He said the decision is "wrong and ignores the reality of a highly competitive microprocessor market."

"There has been absolutely zero harm to consumers," Otellini added.

The $1.44 billion fine is the largest antitrust penalty the commission has ever levied against a single company. The duration of the antitrust abuse, the severity of the actions, and any mitigating circumstances the company could offer were taken into consideration in calculating the amount of the fine. Antitrust officials said that there were no mitigating circumstances in this case.

The fine dwarfs that levied against Microsoft Corp., which was ordered to pay €497 million ($677 million) for abusing its dominant position in the software market, plus an additional €1.2 billion ($1.6 billion) for failing to honor the antitrust ruling.

The commission will monitor Intel's compliance with the ruling. Unlike the Microsoft case, in which it appointed a monitoring trustee, the commission will do the job itself, said officials in the antitrust group.

The commission investigation centered around charges that Intel illegally gave rebates to computer manufacturers in return for their buying the bulk of their x86 microprocessors from Intel.

The company was also accused of paying computer makers to cancel or delay the launch of machines using chips made by rival AMD, and of selling its chips for server computers at below cost to large customers such as governments and universities.

Last year, the commission added fresh charges, accusing the chip maker of paying generous rebates to Media Markt, Europe's biggest chain of IT stores, in return for it delisting all computers containing AMD chips.

Intel dominates the PC chip market, with its share estimated at 81.9% at the end of 2008 while AMD held 17.7%, according to industry research firm IDC.

Europe isn't the only region where Intel has run into trouble with antitrust authorities. In 2005, the company settled with Japan's competition office. Last year, it was fined $25 million in South Korea. Meanwhile, the company is under investigation in the U.S. by the Federal Trade Commission.

Copyright © 2009 IDG Communications, Inc.

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