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Commission upholds charges that the global giant illegally squeezed out its rivals for the European chip market

SANTA CLARA – 05/20/09 – The European Commission (EC) has fined Intel Corp. a record $1.45 billion, saying the world's biggest chip maker used illegal sales tactics to squeeze its smaller rivals, particularly Advanced Micro Devices Inc. (AMD), out of the lucrative European semiconductor market.

Intel called the decision wrong and said it would appeal to the EC courts in Luxembourg.

Paul Otellini, Intel president and chief executive officer, said, “Intel takes strong exception to this decision. We believe the decision is wrong and ignores the reality of a highly competitive microprocessor marketplace - characterized by constant innovation, improved product performance and lower prices.”

Stating that “there has been absolutely zero harm to consumers,” Otellini said, “We do not believe our practices violated European law. The natural result of a competitive market with only two major suppliers is that when one company wins sales, the other does not."

The Directorate General for Competition of the Commission "ignored or refused to obtain significant evidence that contradicts the assertions in this decision," he said.

In its official statement, the Brussels-headquartered Commission, which acts as the executive arm of the European Union, stated that Intel “violated EU competition rules by exploiting its dominant position with a deliberate strategy to shut out AMD,” which, like Intel, is based in California’s Silicon Valley.

Intel, the EC said, “blocked legal competition” by giving rebates to computer manufacturers Acer, Dell, HP, Lenovo and NEC for purchasing all or almost all of their x86 computer processing units from the chip maker and paid them to stop or delay the launch of computers based on AMD chips.

In addition, the eight-year investigation led the EC to rule that Intel paid Media Saturn Holding, Germany's biggest electronics retailer, to only stock computers that used its chips. That meant that workers at AMD's biggest European plant in Dresden, Germany, could not buy AMD-based personal computers from their own city's main PC store.

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

EC regulators said the fine was calculated on the value of Intel's European chip sales over the five years and three months that it was accused of violating EC anti-monopoly regulations.

The ruling is expected to uncork a flood of lawsuits targeting Intel. For starters, according to PC Magazine, AMD is expected to file a civil lawsuit against its giant rival within the next several weeks.

The magazine quotes British antitrust lawyer Alan Davis, who said, “This will open the floodgates for competitors to sue. There was a complainant in this case, AMD, and without question they and other competitors will pursue a case for damages.”

The fine, Davis added, “goes to the European Commission’s coffers, not to the competitors who suffered damage to their businesses because of Intel’s anti-competitive practices. What is likely to happen is that action will be started and a massive settlement will be made.”

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