Intel Will Appeal Against £950m EC Fine, Says Otellini

The European Commission has announced that it intends to impose a fine of €1 060 000 000 (£953m) on Intel for abusing its market position.

In a statement released on Wednesday, the EC said that Intel had engaged in “illegal anticompetitive practices to exclude competitors from the market for computer chips”.

The EC’s case against Intel was based on complaints – in 2000, 2003 and 2006 – from rival chip-maker AMD. The EC said that Intel “interfered directly in the relations between computer manufacturers and AMD”.

According to the EC, the illegal activity took two forms. Firstly Intel gave rebates to computer vendors on the condition that they bought their x86 processors from the chip maker and made direct payments to one major retailer on the condition that only stocked PCs with Intel chips. The EC also claims that Intel made payments to computer makers to delay the release of products using alternative x86 processors.

“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 EC competition commissioner Neelie Kroes.

As to which vendors and manufacturers were involved in activity with Intel, the EC statement was slightly ambiguous and no spokesperson was available at the time of writing to explain the exact meaning of the reference.

“The computer manufacturers concerned by Intel’s conduct in the Commission’s decision are: Acer, Dell, HP, Lenovo and NEC. The retailer concerned is Media Saturn Holding, owner of the MediaMarkt chain,” the EC stated.

While is not clear from the language used whether the EC is accusing Acer, Dell, HP, Lenovo and NEC of colluding with Intel in the activity, the EC did go on to claim that “Intel made payments to major retailer Media Saturn Holding from October 2002 to December 2007 on condition that it exclusively sold Intel-based PCs in all countries in which Media Saturn Holding is active”.

AMD understandably welcomed the EC’s decision. “Today’s decision of the European Commission is historic, and it is a game changer for the global IT industry,” said Giuliano Meroni, president of AMD EMEA.

Intel responded to the EC ruling by saying that it will appeal the decision and that it believed it acted fairly. “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 Intel president and chief executive Paul Otellini.

Otellini added that the reason that AMD’s sales suffered was due to the effects of healthy competition. “The natural result of a competitive market with only two major suppliers is that when one company wins sales, the other does not,” he said. “We believe this evidence shows that when companies perform well the market rewards them, when they don’t perform the market acts accordingly.”

He also claimed that the company does not offer rebates or other deals to vendors and partners that are not justified. “Intel never sells products below cost. We have however, consistently invested in innovation, in manufacturing and in developing leadership technology. The result is that we can discount our products to compete in a highly competitive marketplace, passing along to consumers everywhere the efficiencies of being the world’s leading volume manufacturer of microprocessors.”

The EC claims the world market for x86 CPUs is currently worth approximately €22 billion (US$ 30 billion) per year, with Europe accounting for approximately 30 percent.