Page last updated at 18:27 GMT, Wednesday, 13 May 2009 19:27 UK

EU slaps a record fine on Intel

EU Competition Commissioner Neelie Kroes says Intel 'took advantage of their position'

Computer chipmaker Intel has been fined a record 1.06bn euros ($1.45bn; £948m) by the European Commission for anti-competitive practices.

It dwarfs the 497m euro fine levied on Microsoft in 2004 for abusing its dominant market position.

The Commission found that between 2002 and 2007, Intel had paid manufacturers and a retailer to favour its chips over those of Advanced Micro Devices (AMD).

Intel has announced that it will appeal against the verdict.

Intel's senior vice president Bruce Sewell told BBC Five Live that Intel contested the findings and was seeking a chance to "clear our name and exonerate the company."

He denied "categorically" that it had paid manufacturers to favour its products over those of rivals.

"We would never pay for any kind of obligation," Mr Sewell said. "We provide incentives to customers to buy our products."

He added that there had been no harm to customers and that prices in the microprocessor market had fallen sharply in recent years.

The fine was welcomed by AMD, which had lodged complaints in 2000, 2003 and 2006.

"The EU decision will shift the power from an abusive monopolist to computer makers, retailers and above all PC consumers," said Giuliano Meroni, AMD's European president.

'Sustained violation'

The Commission said that personal computer makers Acer, Dell, HP, Lenovo and NEC had all been given hidden rebates if they only used Intel chips.

It is a major decision that shows the Commission is serious about curtailing abusive behaviour of dominant companies
David Anderson, lawyer, Berwin Leighton Paisner.

It also found that Media Saturn, which owns Europe's biggest consumer electronics retailer Media Markt, had been given money so that it would only sell computers containing Intel chips.

"Intel has harmed millions of European consumers by deliberately acting to keep competitors out of the market for computer chips for many years," said Competition Commissioner Neelie Kroes.

"Such a serious and sustained violation of the EU's antitrust rules cannot be tolerated."

A Commission spokesman said there was no question of action being taken against the firms who accepted the rebates.

"They were not the ones abusing their dominant position in the market," he added.

Last year, Intel made 80.5% of all the microprocessors in PCs, while AMD made 12%.

'Wall of resistance'

The Commission has also ordered Intel "to cease the illegal practices immediately to the extent that they are still ongoing".

In addition to providing rebates to manufacturers that bought almost entirely Intel products, the Commission found that the chipmaker had paid them to postpone or cancel the launch of specific products based on AMD chips.

FROM BBC WORLD SERVICE

Ms Kroes joked in her own news conference that Intel would now have to change its latest advertising slogan from "sponsors of tomorrow" to "the sponsor of the European taxpayer".

Both Intel and AMD are based in California. Intel has 83,900 staff worldwide and has a market value of $85.4bn.

AMD employs about 11,000 people and has a market value of $2.6bn.

"Despite its strong defence, Intel is facing a wall of regulatory resistance to its business practices around the world, with antitrust infringement decisions against it now in Japan, Korea, and the EU, while the US authorities are investigating Intel as well," said David Anderson, a lawyer at Berwin Leighton Paisner.

"It is a major decision that shows the Commission is serious about curtailing abusive behaviour of dominant companies, especially in the high-tech sector."

Technology analysts Gartner said the decision was unlikely to have any significant impact on market conditions.

"The Intel-AMD market share is likely to remain roughly aligned with manufacturing capacity, adjusted for technology capabilities," said Gartner managing vice-president Martin Reynolds.

"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. And Intel's greatest challenge will remain market growth, not market share."



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