Page last updated at 18:26 GMT, Wednesday, 13 May 2009 19:26 UK

Will fine force Intel to change its ways?

By Mark Gregory
European business reporter, BBC News

Intel sign
European action on anti-competitiveness has left the US in the shadows.

By any standards, the fine meted out to Intel for anti-competitive behaviour is a hefty punishment.

It signals the European Union wants to get even tougher with big, powerful companies that have abused a dominant market position by squeezing rivals.

But actually, even 1.06bn euros ($1.45bn; £948m) is not a crippling penalty for a company as large as Intel, which had revenues of nearly $40bn last year.

The main damage to Intel is bad publicity and the assault on its reputation.

Competition experts will be combing through the details of how the European Commission intends to persuade Intel to change its business practices.

'Extra muscle'

Past experience suggests it is quite easy to impose a fine and ban very specific behaviour. but hard to force companies to fundamentally alter how they operate.

The European Commission, the executive arm of the European Union, has only limited powers to prescribe how companies should operate.

Relatively recently, however, the Commission gained some extra muscle.

The Obama administration has signalled that it plans to get much tougher, and take a more European type to policing competition issues

It now has the authority to fine firms up to 10% of their annual turnover.

That is probably why the penalty for Intel was so much greater than the $650m fine required from Microsoft in another high profile competition case five years ago.

That case demonstrated how tough it can be to force companies to change their ways.

On top of the original penalty Microsoft was subsequently hit by two further rounds of fines for non compliance.

Its total bill comes to well above $1bn.

Obama impact

Both Intel and Microsoft are American companies, so you might ask why is it European regulators not US regulators that have questioned their business methods.

Both companies do a lot of business in Europe of course, But that is only part of the reason.

Until now US competition regulators have tended to stay on the sidelines unless there is very clear evidence that business tactics are damaging the interests of consumers.

They have been less keen to get involved in what are essentially rows between companies.

But that may be changing. This week the Obama administration signalled that it planned to get much tougher, and take a more European type to policing competition issues.

The outcome of Europe's eight year long investigation into Intel will be seen as another milestone in regulators efforts to find competition polices that deliver real change.

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