Chip giant's system of rebates shut out smaller rival AMD
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(BRUSSELS) The European Union fined Intel Corp a record 1.06 billion euros (S$2.11 billion) yesterday, saying the world's biggest computer chip maker used illegal sales tactics to shut out smaller rival AMD.
The fine exceeded an 899 million euros monopoly abuse penalty for Microsoft Corp last year. Intel called the decision 'wrong' and said it would appeal.
Intel, based in Santa Clara, California, has about 80 per cent of the world's personal computer microprocessor market - and faces just one real rival, Advanced Micro Devices Inc (AMD).
The European Commission says Intel broke EU competition law by exploiting its dominant position with a deliberate strategy to keep AMD out of the market that limited customer choice.
It said Intel gave rebates to computer manufacturers Acer, Dell, HP, Lenovo and NEC for buying all or almost all their x86 computer processing units (CPUs) from Intel and paid them to stop or delay the launch of computers based on AMD chips.
Intel president and CEO Paul Otellini said the company would appeal to the EU courts because 'the decision is wrong' and 'there has been absolutely zero harm to consumers'. The company promised to comply with the EU order but criticised it as extremely ambiguous.
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AMD's Europe president Giuliano Meroni said the EU order 'will shift the power from an abusive monopolist to computer makers, retailers and, above all, PC consumers'. Regulators said the company also paid Germany's biggest electronics retailer, Media Saturn Holding - which owns the Media Markt superstores - from 2002 to 2007 to stock only Intel- based computers.
This meant workers at AMD's biggest European plant in Dresden, Germany, could not buy AMD- based personal computers at their 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.'
Ms Kroes joked that Intel would now have to change its latest global ad campaign - 'sponsors of tomorrow' - to proclaiming 'the sponsor of the European taxpayer'. 'I can give my vision of tomorrow for Intel here and now: abide by the law,' she added.
EU regulators said they calculated Intel's fine on the value of its European chip sales over the five years and three months that it broke the law. Europeans buy some 30 per cent of the 22 billion euros in computer chips sold every year.
They could have gone even higher as EU antitrust rules allow them to levy a fine of up to 10 per cent of a company's annual global turnover for each year of bad behaviour. Intel's worldwide turnover was 27.9 billion euros in 2007.
European consumers group BEUC welcomed the fine and said Intel should be held to account to consumers through civil suits in European courts. So far, these are rare but the EU is urging victims of antitrust action to seek damages.
'Intel should be liable to compensate the victims of its illegal practices,' said Monique Goyens, head of the group. 'Consumers have been paying too much for their computers and they should be compensated.'
The manufacturer rebates started in 2002, the EU said, with most ending in 2005 - apart from a 2007 deal for one unidentified company to source notebook computer chips only from Intel.
Regulators said rebates that give discounts for large orders are illegal when a monopoly company makes them conditional on buying less of a rival's products or not buying them at all.
Manufacturers depend on Intel to supply most of the chips they need and faced higher costs if they lost most or all of a rebate by choosing AMD chips for even a small order.
Hewlett-Packard buys a fifth of Intel chips with Dell taking 18 per cent, according to market research from Hoovers. -- AP
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