Anti-trust crackdown pending, Commission warns Intel

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Two years after it conducted dawn raids in Intel offices, the European Commission has told the chip maker that it is suspected of abusing its dominant market position, with the aim of excluding rival AMD from the computer microprocessor market.

On 26 July 2007, the European Commission’s anti-trust department sent a Statement of Objections to Intel, which broadly supports AMD’s claims of anti-competitive behaviour. The Commission says that the confidential statement concerns in particular three practices that Intel has used in order to exclude AMD from the mainboard processor market: 

  1. Intel has provided substantial rebates to various Original Equipment Manufacturers (OEMs) conditional on them obtaining all or the great majority of their CPU requirements from Intel.
  2. In a number of instances, Intel made payments in order to induce an OEM to either delay or cancel the launch of a product line incorporating an AMD-based CPU.
  3. In the context of bids against AMD-based products for strategic customers in the server segment of the market, Intel has offered CPUs on average below cost.

People at AMD claim that Intel pressed a number of personal computer makers into not equiping more than a certain percentage of PCs with AMD processors, even at times when those were technically in advance of Intel chips and also cheaper than the competing product. 

They go on to say that the competitor pressed retailers, such as the Media Markt and Saturn-Hansa chains, both owned by the German Metro corporation, into not selling any AMD products. One of the means of making retailers dependent on Intel, AMD says, is the practice of offering to pay parts of the costs for advertising or even the whole price of ads when the “Intel inside” logo is featured prominently. 

Bruce SewellIntel  senior vice-president and general counsel, said: "We are confident that the microprocessor market segment is functioning normally and that Intel's conduct has been lawful, pro-competitive and beneficial to consumers. While we would certainly have preferred to avoid the cost and inconvenience of establishing that our competitive conduct in Europe has been lawful, the Commission's decision to issue a Statement of Objections means that at last Intel will have the opportunity to hear and respond to the allegations made by our primary competitor." 

Giuliano MeroniAMD's president for Europe, Middle East and Africa (EMEA), said: "This is a moment of truth for the entire IT industry. The European Commission is serious about ending Intel's abuse of its dominant position in the global microprocessor market. We are confident that this Statement of Objections will be a catalyst in opening the global microprocessor markets for the benefit of consumers and PC companies alike." 

Mainboard processors are the heart of every modern computer, and their increase in processing power has been a precondition for the raise of productivity induced by ICT over the last 20 years. The US$ 30billion per year market is marked by fierce competition between only two players: Intel and its sole remaining competitor AMD, which holds a much smaller market share. 

Following complaints by AMD on the rival's alleged uncompetitve bahavior, the Commission raided, in July 2005, Intel offcies in Germany, Britain, Spain and Italy. At the same time, offices of a number of other companies, including computer makers Dell and Sony, were also investigated. 

AMD says that Intel has pressed 38 computer makers and retailers into either giving exclusivity to Intel products or limiting AMD's market share, even if the rival offered better products at a cheaper price.

Following the raids, Intel's market share dropped from the former 90% by income and a 78% by volume, allowing AMD to expand its positioning on the market. More recently, however, Intel's market share has surged again, due to renewed anti-competitive practices, AMD argues. 

AMD, although based in the San Francisco Bay Area, only around 5 kilometres away from Intel, has relocated a much greater proportion of its production to Europe, notably to the so-called Silicon Saxony close to Dresden, Germany. The company says that it now provides 3,500 jobs in Europe, the Middle East and Africa (EMEA). 

  • Intel is granted time until 6 December 2007 to respond to the Statement of Objections. 
  • The company is then entitled to an oral hearing, in which it can make its case. 
  • If Intel does not manage to convince the Commission of its devotion to competitive principles, the Commission may order the practices to be ended. 
  • The Commission may also impose a fine, which may amount to as much as 10% of Intel's yearly global turnover. At present, this would mean that the fine could be as high as €3.5 billion. 

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