Intel Braced For Billion-Euro Fine Under European Antitrust Rules

By Nikki Tait in Brussels and Chris Nuttall in San,Francisco -Published: May 11 2009

Intel, the world's biggest chipmaker by sales, is bracing itself for one of the heaviest penalties levied in Europe for anti-competitive behaviour. The European Union is expected formally to approve action against Intel at its weekly meeting of commissioners on Wednesday.

It will be the climax of a near-decade-long investigation into the group's marketing practices. Lawyers say the fine could top those heaped on Microsoft, which, combined, exceeded €1bn ($1.36bn).

The Intel investigation dates back to 2000, when its closest rival, Advanced Micro Devices, filed a complaint that it was being driven out of the market by Intel's practices.

Four years later, the case gathered steam and, after a series of raids, Intel was formally charged in July 2007. It had allegedly abused its dominant market position and offered illegal rebates to computer manufacturers, which had shut AMD out of the market.

After further raids last year, the European Commission accused Intel of using rebates to persuade a leading European retailer to sell only Intel-based personal computers. Intel has consistently denied behaving illegally. "Our business practices are lawful, pro-competitive and good for consumers," it says.

In deciding how to shape and enforce a "cease-and-desist" order, the EU regulator will confront a web of incentives and rebates offered by Intel to customers that have helped it dominate the market for PC microprocessor chips.

Opinions are divided on how specific the Commission will be. In theory, if its final decision goes against the company, the fine could be as much as 10 per cent of Intel's annual worldwide revenues. These totalled $37.6bn in 2008, meaning the maximum level could approach $4bn. However, that 10 per cent level is rarely reached.

Intel has refused to discuss whether it would appeal against an adverse decision. After Japan's fair trade commission ruled in 2005 that Intel had abused its monopoly power, the company heeded a cease-and-desist order, but did not accept guilt or pay a fine.

Last June, South Korea's fair trade commission fined Intel Won26bn ($21m) for abusing its dominant market position there and offering discounts to two Korean PC makers to drive AMD out of the market. This decision is under appeal. Intel had $10.3bn in cash and securities at the end of the first quarter.

Source: http://www.ft.com/cms/s/0/b5dd5e88-3dc2-11de-a85e-00144feabdc0.html

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