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May 13, 2009

EU hits Intel with record fine

Chip firm guilty of anti-competitive practices

By Steve Evans

This article was updated on May 15. Click here for more

The European Commission has fined chip maker Intel a record €1.06bn (£950m) for breaking European anti-trust regulation.

The case, which has rumbled on for nearly 10 years, centres on accusations that Intel offered hidden rebates to customers such as Dell, HP and Acer in return for buying all, or almost all, their chips from Intel instead of rival offerings from AMD.

Competition Commissioner Neelie Kroes said in a statement: “Intel has harmed millions of European consumers by deliberately acting to keep competitors out of the market for computer chips for many years. Such a serious and sustained violation of the EU’s antitrust rules cannot be tolerated.”

Intel has announced that it intends to appeal the verdict.

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,” said Paul Otellini, Intel’s president and CEO.

Bruce Sewell, Intel SVP and general counsel, also rejected the EU’s decision. “The basic allegation against Intel is that it used lower prices, in the form of rebates, to prevent customers from buying or supporting AMD, or to punish customers when they did so. Such claims are false. Intel has never required a customer to agree not to buy from AMD in order to obtain a discount, nor raised a customer’s prices when it decided to buy from AMD,” he said in a statement.

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Analyst house Gartner believes that the outcome may not have a long-term impact on the industry. Martin Reynolds, managing vice president and fellow, said: “The decision is unlikely to make any significant change in market conditions. The Intel-AMD market share is likely to remain roughly aligned with manufacturing capacity, adjusted for technology capabilities. 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.”

Reynolds did add however that the EU’s decision could result in civil cases against Intel.

AMD has released a number of statements about the ruling. Dirk Meyer, president and CEO, said: “Today’s ruling is an important step toward establishing a truly competitive market. We are looking forward to the move from a world in which Intel ruled, to one which is ruled by customers.”

AMD EMEA president Giuliano Meroni said: “The EU decision will shift the power from an abusive monopolist to computer makers, retailers and above all PC consumers.”

“After an exhaustive investigation, the EU came to one conclusion – Intel broke the law and consumers were hurt. With this ruling, the industry will benefit from an end to Intel’s monopoly-inflated pricing and European consumers will enjoy greater choice, value and innovation,” said Tom McCoy, AMD executive vice president for legal affairs.

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