EU slaps $1.45 billion fine on Intel

Decision wrong, ignores reality of a highly competitive microprocessor marketplace: Intel.

The European Union on Wednesday fined Intel, the world’s largest computer chip manufacturer, over its anti-competitive practices aimed to snuff out its competitor AMD.

In a ruling that is likely to cause tremors in the computer chip market, the EU slapped a huge fine of $1.45 billion on Intel for following “illegal anti-competitive practices” to prevent its competitors like AMD from having a foothold in the EU.

The illegal practices involved making payments to a major retailer to stock only computers with Intel chips.

The verdict coincides with one of the biggest trade disputes EU is fighting with the United States at the World Trade Organization (WTO) over duty-free access for American ITA products. The US, along with Taiwan, had launched a major dispute against the EU complaining that it was not adhering to commitments it undertook as part of the ITA agreement.

The EU’s ruling against Intel has put paid to claims of competitive practices adopted by American companies with Intel becoming the second major violator of the EU anti-trust rules after Microsoft, analysts said.

“Intel has harmed millions of European consumers by deliberately acting to keep competitors out of the market for computer chips for many years,” said European Union Competition Commissioner Neelie Kroes, arguing that such a serious and sustained violation of the antitrust rules could not be tolerated.

Brussels said Intel’s anti-competitive practices concerned Acer, Dell, HP, TLenovo and NEC, and were perpetrated through the giant retailer —Media Saturn Holding, owner of the MediaMarkt chain.

It was also found that Intel gave huge rebates to computer manufacturers between 2002 and 2007 on the condition that they use only Intel central processing units and not the AMD ones.

Intel made direct payments to Media Saturn Holding between October 2002 and December 2007 to ensure that it sold only Intel-based PCs in countries where the retailer had market presence.

The EU acknowledged that certain rebates could lead to lower prices for consumers. However, it maintained that Intel, due to its dominant position, offered only conditional rebates that were aimed at causing maximum injury to its competitors.

Intel chief Paul Otellini disputed the EU ruling. “Intel takes strong exception to this decision.

We believe the decision is wrong and ignores the reality of a highly competitive microprocessor marketplace — characterised by constant innovation, improved product performance and lower prices. There has been absolutely zero harm to consumers. Intel will appeal,” he said

Intel is also likely to face another dispute with its Federal Trade Commission, which is also currently investigating anti-competitive practices by the company.