Intel fined €1bn by EU Commission for anti-trust violations

13 May 2009

US computer chip manufacturer Intel has been fined €1.06bn by the European Commission for violating anti-trust rules.

According to the Commission, throughout the period October 2002–December 2007, Intel abused its dominant position in the worldwide x86 CPU market by engaging in illegal anti-competitive practices designed to exclude competitors.

Intel holds at least a 70pc share of x86 CPU market globally, which is currently worth approximately €22bn (US$30bn) per year, with European sales accounting for approximately 30pc of that.

The Commission’s investigation followed complaints from chip-maker AMD in 2000, 2003 and 2006. It found that Intel had engaged in two forms of illegal activities.

Firstly, Intel gave wholly or partially hidden rebates to computer manufacturers on condition that they bought all, or almost all, their x86 CPUs from Intel.

The computer manufacturers concerned were Acer, Dell, HP, Lenovo and NEC.

While the Commission said it did not object to the rebates Intel was offering, it objected to the conditions Intel attached to them.

The Commission said that Intel structured its pricing policy to ensure that a computer manufacturer that opted to buy AMD CPUs 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.

Such rebates and payments, the Commission said, effectively prevented customers, and ultimately consumers, from choosing alternative products.

Intel also made direct payments to a major retailer, Media Saturn Holding, on the condition that it would stock only computers with Intel x86 CPUs.

Intel’s second infringement of anti-trust rules involved it making direct payments to computer manufacturers to halt or delay the launch of specific products containing AMD’s x86 CPUs and to limit the sales channels available to these products.

The Commission found that these payments had the potential effect of preventing products for which there was a consumer demand from coming to the market.

By undermining its competitor’s ability to compete on the merits of their products, the Commission said Intel’s actions also undermined competition and innovation.

The Commission said that it obtained proof of the existence of many of the conditions found to be illegal in the anti-trust decision, even though these were not made explicit in Intel’s contracts.

The proof was based on evidence such as emails obtained inter alia from unannounced onsite inspections, responses to formal requests for information and in a number of formal statements made to the Commission by the other companies concerned.

The Commission also said there was evidence that Intel had sought to conceal the conditions associated with its payments.

“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,” said EU Competition Commissioner, Neelie Kroes.

The €1.06bn fine imposed on Intel takes into account of the duration and gravity of the infringement, the Commission said, and was calculated on the value of Intel’s x86 CPU sales in the European Economic Area. Intel’s worldwide turnover in 2007 was €27.9bn.

The duration of the infringement established in the decision is five years and three months.

The Commission said it will now actively monitor Intel’s compliance with its decision.

By Jennifer Yau