Brussels, 18/07/2008 (Agence Europe) - The European Commission confirmed on the evening of 17 July that it has sent a statement of objections to the American IT processor manufacturer Intel. Following surprise inspections carried out in February, the Commission suspects Intel of using illicit practices to exclude its competitor AMD from the market. The two companies share almost exclusively the market for central processing units or CPUs, a key component in computers. The investigation in question concerns CPUs of the type x86.
“We're naturally disappointed that the Commission has decided to issue a new SO” Intel declared in a press release, adding “we are confident that our response will show that the allegations in the SO are unfounded”. The company is suspected of: 1 - granting substantial rebates to retailers who agree to only sell Intel-based PCs; 2 - making payments to induce a computer manufacturer to delay the launch of a product line containing AMD CPUs; 3 - giving substantial rebates to that same manufacturer, conditional on its obtaining all of its CPUs from Intel. This statement of objections is the second to be sent to Intel, the first having been received in July 2007 (EUROPE 9478). This second communication reiterates certain arguments raised in the first, and the Commission also stresses that Intel's behaviour, taken as a whole, forms a consistent strategy designed to exclude its rival from the market. Such an abuse of a dominant position, if confirmed, contravenes article 82 of the EC Treaty.
AMD, which made the complaint which was the reason for the Commission investigation, naturally welcomed the initiative. According to its Chief Administrative Officer, Tom McCoy, Intel's strategy “rob[s] consumers of their fundamental right to choose. No antitrust laws anywhere in the world permit Intel to pay retailers and computer manufacturers to boycott non-Intel products”. This accusation is refuted by Intel: “That is not how Intel does business”, said Steve Rodgers, Vice President of the company and Director of Litigation. It is normal, Mr Rodgers says, for two providers to compete to make the better offer, and for one of the two not to be selected by the client. It is also entirely usual repay a large order with a reduction in price, he added. It should be noted that the Commission has nothing against price reductions; however, it is opposed to such advantages being subject to conditions of avoiding all other providers than Intel. Intel maintains that the terms of its contracts in no way impinge on a healthy market. “All of the hallmarks are of a highly competitive market. Prices go down, performance goes up, output increases”, said Mr Rodgers, stressing that its clients remain free to buy from AMD if they wish. In the last few days Intel announced an increase in its profits of 25% on last year, and decided to pay dividends of 14 cents per share in September 2008. AMD suffered losses of €750 million in the period April to June of this year.
Intel now has eight weeks to respond to the Commission in writing, after which it can also defend itself in an oral hearing. The Commission will then decide whether this is an abuse of a dominant position and, where appropriate, impose a fine. (C.D.)