EU fines Intel €1.06 billion in antitrust case

The European Commission Wednesday found Intel guilty of antitrust violations in the market for PC microprocessors and fined it €1.06 billion ($1.44 billion).

Competition Commissioner Neelie Kroes said that the antitrust action is primarily designed to protect consumers. "Intel has harmed millions of EU consumers," she said, adding that the large fine meted out should "therefore come as no surprise".

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, AMD. 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 wasn't suppressed.

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

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, saying the decision is "wrong and ignores the reality of a highly competitive microprocessor market."

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

The €1.06 billion fine is the largest antitrust penalty the Commission has ever levied against a single company. The size of the fine was calculated taking into consideration the duration of the antitrust abuse, the severity of the actions, and any mitigating circumstances the company could offer. Antitrust officials said that there were no mitigating circumstances in this case.

The fine dwarfs that against Microsoft which was fined €497 million for abusing its dominant position in the software market, plus an additional €1.2 billion for failing to respect the antitrust ruling. The Commission also ordered Intel to stop its illegal practices.

The Commission investigation centered around charges that Intel illegally gave rebates to computer manufacturers in return for them 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 giant of paying generous rebates to Media Markt, Europe's biggest chain of IT stores, in return for it de-listing all computers containing AMD chips.

Intel dominates the personal-computer chip market with share estimated at 81.9% at the end of 2008, while AMD held 17.7%, according to 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 nearly $20 million in South Korea. Meanwhile, the company is under investigation in the U.S. by the Federal Trade Commission.

The IDG News Service is a Network World affiliate.