AMD antitrust response: Ruling will unseat Intel

The European Commission's decision to fine Intel €1.06bn will create an industry 'which is ruled by consumers', AMD chief Dirk Meyer said.
Written by Tom Espiner and David Mey ZDNet.co.uk, Contributor
AMD has responded to Intel's record €1.06 billion ($1.45 billion) antitrust fine from the European Commission, which followed complaints by AMD that Intel was abusing its market dominance to shut out the smaller chipmaker.

Dirk Meyer, AMD's president and chief executive, said that the ruling was an important step toward establishing a truly competitive market.

"AMD has consistently been a technology innovation leader, and we are looking forward to the move from a world in which Intel ruled to one which is ruled by customers," Meyer said in a statement on Wednesday.

In its ruling, the Commission found that Intel had used conditional rebates and other payments to dissuade PC manufacturers and retailers from using AMD's x86 CPUs.

Tom McCoy, AMD's executive vice president for legal affairs, said in the statement that the ruling would see the industry benefit from an end to Intel's "monopoly-inflated pricing" and that European consumers will enjoy greater choice, value and innovation.

Intel has said it will appeal the €1.06bn (£951m) fine, which is the largest antitrust penalty ever levied by the European Commission. Intel chief executive Paul Otellini said in a statement that his company's practices had resulted in "absolutely zero harm to consumers", and that the chipmaker did not believe it had violated EU law.

In its decision, the Commission said that Intel had made direct payments to Media Saturn Holding, owners of the giant European electronics retail chain Media Markt, to make sure the chain would stock only PCs that used Intel's x86 chips.

Speaking in a press conference following the Commission's ruling, Intel senior vice president Bruce Sewell "absolutely and categorically" denied that finding. "At no time has Intel ever paid money to a retailer or customer," Sewell said. "Intel provides discounts or incentives in the form of funds to launch marketing campaigns. At no time have there been any payments."

Sewell also said that Intel had at no time put any conditions on the rebates it offered to computer manufacturers, another part of the Commission's findings. "There is no requirement for a customer to buy from Intel," he said. "Customers may choose to only buy from Intel, but there is no condition that the customer only buy from Intel."

Media Saturn Holding was unable to give ZDNet UK any details of payments from Intel related to the Commission's findings. "As you can imagine, Intel is one of our major suppliers, so we can't comment," a spokesperson for Media Saturn Holding said.

ZDNet UK understands, however, that Media Markt was involved in the Commission investigation and worked closely with investigators and helped them to come to the investigator's conclusions.

Commission spokesman Jonathon Todd declined to say how much Intel had paid Media Markt, but told ZDNet UK the amount paid was "irrelevant". He rebutted Intel's denial of its findings regarding the German retailer. "Intel did pay Media Markt with a view to using [Intel]," Todd said.

The European commissioners are ready to counter Intel's assertions in the European Court of First Instance, where the appeal will be heard. "The Commission has worked long and hard on the decision, and we are confident [the decision] will withstand the scrutiny of the court," the spokesman said.

Intel has already come under antitrust scrutiny in South Korea, where regulators said in June that they would fine the company $25.4m for abusing its dominant position in the local chip market.

The European Commission decision comes a day after Otellini told investors that Intel, which controls almost 80 percent of the microprocessor market, has seen better second-quarter orders than expected. AMD has just started gaining ground on Intel, with its last quarter's market share showing 4.6 percent growth to 22.6 percent of the x86 market, following five quarters of decline.

The Commission's decision is unlikely to make any significant change in market conditions, Gartner vice president Martin Reynolds said in a statement.

"The Intel-AMD market share is likely to remain roughly aligned with manufacturing capacity, adjusted for technology capabilities," Reynolds said. "Intel will pay its fine and carefully inspect its sales relationships to protect against risky influence. AMD does not receive any money from the fine, which accrues to the EU tax budget. Intel's greatest challenge will remain market growth, not market share."

Reynolds added, however, that the Commission's ruling would pave the way for civil cases against Intel. "The main case [is] due to go to trial in Delaware in 2010," he said. AMD filed a private antitrust suit against Intel in US District Court in Delaware in 2005.

This article was originally posted on ZDNet UK.

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