EC slams Intel with €1bn antitrust fine

Intel has been fined more than €1bn by the European Commission for violating antitrust legislation, following a lengthy investigation prompted by complaints made by its chipmaking rival AMD.

Intel is being fined €1.06bn for engaging in illegal anticompetitive practices to exclude competitors from the market for computer chips called x86 CPUs, the Commission said in a statement on Wednesday.

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

Between October 2002 and December 2007, Intel held more than 70 per cent of the worldwide x86 CPU market. The Commission found that, during the period in question, Intel engaged in two illegal practices. The first was that it gave wholly or partially hidden rebates to computer manufacturers on condition that they bought all or almost all of their x86 CPUs from Intel. This illegal practice also included Intel's making direct payments to a major retailer so it would stock only computers with Intel x86 CPUs.

The second illegal practice was that Intel made direct payments to computer manufacturers to halt or delay the launch of specific products containing competitors' x86 CPUs and to limit the sales channels available to these products.

The computer manufacturers named by the Commission as being involved in the rebates and payments included Acer, Dell, HP, Lenovo and NEC. The retailer was Media Saturn Holding, the parent company of the MediaMarkt chain.

Intel has been ordered by the Commission to stop any of the anticompetitive practices in which it may still be engaged. The EU commissioners said these practices had harmed consumers throughout the European Economic Area and undermined competition and innovation.

The €1.06bn fine is the largest antitrust penalty the Commission has ever imposed, beating the €497m fine levied on Microsoft in 2004 for abusing its market dominance. However, in February 2008, Microsoft's failure to pay that fine resulted in a further €899m penalty.

However, the Commission noted that at 4.15 per cent of Intel's 2008 turnover, the fine was less than half of the allowable maximum of 10 per cent of a company's annual turnover. Intel has to pay the fine within three months, the Commission said, adding that the money would go to the EU's central budget, "thus reducing the contributions that Member States pay to the EU".

According to the Commission's statement, Europe accounts for around 30 per cent of the €22bn global x86 CPU market. The x86 chip architecture underpins the vast majority of modern PCs.

The Commission acknowledged in its decision that rebates can lead to lower prices for consumers but said making rebates conditional on buying less or none of a rival's products was abusive.

"Intel structured its pricing policy to ensure that a computer manufacturer which opted to buy AMD CPUs for that part of its needs that was open to competition would consequently lose the rebate (or a large part of it) that Intel provided for the much greater part of its needs for which the computer manufacturer had no choice but to buy from Intel," the Commission said. "The computer manufacturer would therefore have to pay Intel a higher price for each of the units supplied for which the computer manufacturer had no alternative but to buy from Intel."

The Commission described how AMD had offered an unnamed manufacturer one million free CPUs, but...

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