Intel to fight EUR1bn EU fine

YorkLONDON/NEW YORK: Intel has vowed to fight a record EUR1.03 billion fine imposed by the European Commission (EC) as criticism grows in the US that the chipmaker is being unfairly singled out for anti-competitive behaviour.

The commission levied the fine, which is payable at once despite the appeal, for what it called “illegal anti-competitive practices”, citing rebates offered to computer manufacturers Dell, Hewlett-Packard, Acer, Lenovo and NEC. The deals were struck on the condition that the central processing unit (CPU), the computer’s “brain”, should come from Intel — effectively locking out its bitter but much smaller rival Advanced Micro Devices (AMD). Intel holds 77 per cent of the world market for CPUs.

The fine drew a sceptical reaction in the US, where critics of the EU aked whether consumers had truly suffered from Intel’s business practices. Jonathan Zuck, president of the Association for Competitive Technology, said chip prices had dropped by 60 per cent over a decade and processing power that once cost $1 could now be purchased for just a cent.

“The EU should not rejoice at this seeming triumph over American big business,” said Wayne Crews of the Competitive Enterprise Institute, a free market think-tank. “Instead, it should ponder if its policies make Europe hospitable for innovation.”

Nevertheless, the EU decision could also presage an investigation by the US authorities into Intel’s business practices there. The department of justice confirmed in June last year that it had a formal antitrust probe under way, and in January 2008 the New York state attorney general also opened an inquiry into Intel’s methods.

The European Union’s competition commissioner, Neelie Kroes, said the penalty was justified because the company had skewed competition and denied consumers choice.

Kroes said Intel had “used illegal anticompetitive practices to exclude its only competitor and reduce consumers’ choice and the whole story is about consumers.” She said Intel’s practices had “undermined innovation”.

Paul Otellini, the chief executive of Intel, retorted that “there has been absolutely zero harm to consumers”, and hit back angrily at the decision.

“We do not believe our practices violated European law,” he said.

“The natural result of a competitive market with only two major suppliers is that when one company wins sales, the other does not.” Giuliano Meroni, president of AMD’s operations in Europe, said the decision would “shift power from an abusive monopolist to computer-makers, retailers and above all PC consumers”.

The matter will now go to appeal, but Intel — which has warned of falling revenues and the need for job cuts — will still have to pay the fine.

If Intel wins, it will be repaid the money; otherwise it will be used to defray the costs of the commission.