Intel has been fined more than €1 billion by the European Commission for violating antitrust legislation, following a lengthy investigation prompted by complaints made by its chipmaking rival AMD.
Intel has been fined more than €1 billion by the European
Commission for violating antitrust legislation, following a lengthy
investigation prompted by complaints made by its chipmaking rival
AMD.
Intel has harmed millions of European consumers by deliberately
acting to keep competitors out of the market for computer chips for
many years
The European Commission's Neelie Kroes
Intel is being fined €1.06bn for engaging in illegal
anticompetitive practices to exclude competitors from the market
for computer chips called x86 central processing units (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 making direct payments to a major retailer so
that 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
anti-competitive 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 percent 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 percent 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."
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.
Intel CEO Paul Otellini
The Commission described how AMD had offered an unnamed
manufacturer a million free CPUs, but the company had taken only 160,000 CPUs for free because to
take more would have meant losing Intel's rebate on many millions
of CPUs.
Intel also paid computer makers to postpone or cancel the launch
of certain AMD-based products or limit the distribution of
AMD-based products, the Commission said. In one case, a company was
paid to sell its AMD-based business desktops only to small and
medium enterprises and only via direct distribution channels. It
was also paid to postpone the launch of its first AMD-based
business desktop in Europe by six months.
Although many of Intel's violating conditions were not made
explicit in the company's contracts, the Commission found proof of
their existence in emails obtained through unannounced on-site
inspections, formal requests for information and evidence submitted
by other companies involved in the case. "In addition, there is
evidence that Intel had sought to conceal the conditions associated
with its payments," the Commission noted.
Intel said in a statement on Wednesday that it did not believe
its practices had violated European law and that it would appeal
the fine.
"Intel takes strong exception to this decision," the chipmaker's
chief executive Paul Otellini said in the statement. "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."
Otellini said it was "the natural result of a competitive market
with only two major suppliers ... that when one company wins sales,
the other does not".
He added that the Commission had ignored or refused to obtain
significant evidence that contradicts the assertions it made in its
ruling. This evidence would show that "when companies perform well,
the market rewards them; when they don't perform, the market acts
accordingly", he said.
However, Otellini pledged that Intel would cooperate with the EU
Commission's sanctions while it fought the ruling.
"Despite our strongly held views, as we go through the appeals
process, we plan to work with the Commission to ensure we're in
compliance with their decision," Otellini said, adding that Intel
"never sells products below cost".
