The European Commission yesterday (13 May) imposed its highest ever fine on Intel, the world’s leading chipmaker, which stands accused of abusing its dominant position to cripple its only serious rival AMD, ultimately pushing up personal computer prices.
Intel has been charged with a stunning €1.06 billion fine – 4.15% of its 2008 turnover – to be paid within three months, closing a ten-year investigation.
The cornerstone of the Commission’s accusation is the alleged use by Intel of illegal rebates and payments in favour of computer manufacturers and one retail store chain, aimed at preventing competition from AMD.
Intel’s incestuous partners were manufacturers Acer, Dell, HP, Lenovo and NEC. The retailer is Media Markt, a giant in the distribution of electronics. All are considered “victims” of Intel’s unfair practices and will not be subjected to any sanctions, said EU Competition Commissioner Neelie Kroes, who announced the record fine in Brussels on Wednesday.
According to the Commission, Intel forced computer makers to accept discounts tied to exclusivity clauses, which made it impossible for them to accept offers from competitor AMD.
In one case, the EU executive found that a manufacturer had refused an offer by AMD to use for free one million of its central processing units (CPUs), the “brain” present in each computer, on the grounds that this would have broken the exclusivity deal signed with Intel. Consumer groups stood behind the Commission’s stance, saying that CPUs represented up to 30% of a computer’s final price.
In another case, retail chain Media Markt was allegedly paid to sell only Intel-equipped products. Intel made similar illegal payments to computer manufacturers to deliberately delay the launch of AMD-based products or to restrict their sale.
“The Commission finds that Intel did not compete fairly, frustrating innovation and reducing consumer welfare in the process,” said Kroes, announcing the fine yesterday.
Intel promises to appeal
Intel denied all the accusations and promised to appeal the Commission decision. It denied that its contracts with manufacturers and retailers had contained illegal elements. But the Commission based part of its evidence on what it calls “contemporaneous evidence”, such as emails obtained during unannounced inspections.
Intel Vice-President Bruce Sewell described the size of the fine as “arbitrary”. “It bears no relationship to any actual or proven harm or injury,” he said at a press conference in Brussels following the Commission’s announcement.
But Kroes underlined that the Commission could have gone much further, as the maximum fine it can impose for antitrust cases is 10% of a company’s global turnover. Instead of €1 billion, the Commission said it could have slapped a fine of over €3 billion on Intel, as the company’s global turnover stood well above €30 billion in 2008.