EU fines Intel record $1.44 billion in anti-trust case

The European Commission on Wednesday fined computer chip maker Intel a record 1.06 billion euros, or $1.44 billion, for abusing its dominance in the computer chip market to exclude its only serious rival, Advanced Micro Devices.

The Europen Union competition commissioner, Neelie Kroes, said the penalty against Intel, the world's largest chip maker, was justified because the company had skewed competition and robbed consumers of choice.

Brussels says the company gave price discounts to computer manufacturers Acer, Dell, HP, Lenovo and NEC for buying all or almost all their chips from Intel.

Kroes said Intel ''used illegal anticompetitive practices to exclude its only competitor and reduce consumers' choice - and the whole story is about consumers.'' She added that Intel's practices ''undermined innovation.''

The previous record fine for similar abuses in the European Union was €497 million ($677 million at current exchange rates), imposed on Microsoft in March 2004 for blocking competition in markets for server computers and media software.

The fine, the largest ever imposed for any breach of competition law in the EU, beat by a significant margin previous amounts of hundreds of millions of euros levied on chemical and cement companies over the past decade.

Kroes said Intel had pursued a strategy aimed mainly at excluding AMD by paying computer makers and retailers to postpone, cancel or avoid AMD products entirely. Intel ''went to great lengths to cover up its anticompetitive actions,'' Ms. Kroes added.

She ordered Intel to cease offering rebates to computer makers that had helped it maintain a share of about 80 per cent of the market for microchip sales and blocked AMD from increasing its share beyond about 20 per cent.

Paul Otellini, the chief executive of Intel, said the company would appeal. ''We believe the decision is wrong and ignores the reality of a highly competitive microprocessor marketplace,'' Otellini said. ''There has been absolutely zero harm to consumers.''

On the other hand, Giuliano Meroni, the president of AMD's operations in Europe, said the EU decision would ''shift the power from an abusive monopolist to computer makers, retailers and above all PC consumers.''

Under the order, Intel must change its business practices immediately pending its appeal, although it could ask for an injunction. Intel also must pay the fine right away, though that sum would be held in a bank account until appeals are exhausted, a process that could take years.

Although Intel last year made a profit of $5.3 billion, the swingeing fine will still hurt it at a time when it has announced job cuts and falling revenues this year.
 
Crackdown on tech biggies
The commission is entitled to levy fines up to 10 per cent of a company's annual global sales. Intel's annual sales were $37.6 billion in 2008, thus the company could have faced a maximum penalty of close to $4 billion dollars. Money collected in antitrust cases is added to the trade bloc's annual budget of around €130 billion. 

On Tuesday, speaking to investors gathered at the company's headquarters in Santa Clara, California, for an annual meeting, Otellini had vowed Intel would continue spending vast sums of money toward advancing its manufacturing lead over rivals.  

The decision to impose severe punishment on Intel is another reminder of the emergence of European regulators as some of the world's most activist enforcers of antitrust law, and it is a further sign authorities all over the world are raising the stakes for the biggest technology companies. 

Last year, the US Federal Trade Commission stepped up its inquiries into Intel, opening a formal investigation. This week, the head of the US Justice Department's antitrust division, Christine A Varney, made clear that authorities would return to an aggressive enforcement policy against corporations that abuse their market dominance, following a lull under President George W Bush.

The European Commission first took aim at Intel last July, with three specific charges: that Intel "offered discounts to a major European personal computer distributor to favour its products, paid a PC maker to delay marketing a model line using [rival] AMD chips, and also paid it to use Intel's own microprocessors in preference".

Intel responded that the action "suggests that the commission supports AMD's position that Intel should be prevented from competing fairly and offering price discounts which have resulted in lower prices for consumers".