Brussels, 13/05/2009 (Agence Europe) - On Wednesday 13 May, as part of its procedures into abuse of dominant position, the European Commission imposed a record fine of €1 060 000 000 on Intel Corporation. Addressing the press, Competition Commissioner Neelie Kroes said: "Intel has harmed millions of European consumers by deliberately acting to keep competitors out of the market for computer chips for many years. Such a serious and sustained violation of the EU's antitrust rules cannot be tolerated". The abusive practices targeted by the Commission's decision took place throughout the period October 2002-December 2007 and involved the worldwide x86 CPU market worth almost €22bn (30% of which is in Europe). With a strategy that aimed to benefit from its solid market implantation, where it contained at least 70% market share, Intel, concluded the Commission, undermined competition to the detriment of innovation and consumers. The two specific forms of illegal practice detected were: - the conditions created by granting rebates to computer manufacturers (Acer, Dell, HP, Lenovo and NEC) as well as those imposed on a big distributor (Media Saturn Holding, the Media Market parent company); - payments aimed at preventing the sale of rival products from Advanced Micro Device (AMD), which lodged a complaint in 2000.
Abusive conditional rebates and payments. Two elements were challenged. Intel gave wholly or partially hidden rebates to computer manufacturers on condition that they bought all, or almost all, their x86 CPUs from Intel. These conditions changed and were imposed during different periods (between 2002 and the end of 2007). They were based on an obligation of excessive loyalty to Intel. Some manufacturers had to buy their x86 CPUs exclusively from Intel for their computers, while others had to purchase no less than 95% of their CPU needs for business desktop computers from Intel, which therefore left barely any room for their needs to be provided by products open to competition. The Commission explained that according to a settled case-law of the Community Courts, where a company is in a dominant position on a market, rebates that are conditional on buying less of a rival's products, or not buying them at all, are abusive.
Intel's structured pricing policy was restrictive and dissuasive. It prevented AMD from competing on a level of intrinsic quality of its products and it reduced consumer choice. If a business decided to purchase certain AMD products open to competition, it would lose a large part of its rebate on much bigger purchases that it had to make at Intel, in keeping with past agreements. Furthermore, Intel made payments to major retailer Media Saturn Holding from October 2002 to December 2007 on condition that it exclusively sold Intel-based PCs in all countries in which Media Saturn Holding is active.
Payments to halt or delay launch of rival products. Intel also awarded computer manufacturers payments - unrelated to any particular purchases from Intel - on condition that these computer manufacturers postponed or cancelled the launch of specific AMD-based products and/or put restrictions on the distribution of specific AMD-based products. The Commission found that Intel's behaviour was anti-competitive and consisted of postponing the launch of computers that were equipped with AMD processors by several months, or limited the sale of certain computers to SMEs. The Commission also pointed out the US firm had sought to conceal the conditions associated with its payments.
Record fine. The fine is colossal and the biggest fine ever imposed for abuse of dominant position (Microsoft was fined, after appealing, €899 million last year) but it might be raised. Anti-trust rules allow the Commission to impose a fine that is equivalent to 10% of the firm's global turnover. It represents 4.15% of Intel's 2008 turnover. This fine will have to be paid in the three months after notification of the decision. If Intel appeals at the European Court of Justice, which the company has confirmed that it will do, the fine will have to be paid into an account that is blocked until the final verdict. If the sanction is confirmed, the fine will be paid into the EU budget and help reduce member state contributions by the same amount. In a press release, Paul Otellini, Intel Corp's CEO declared: “We believe the decision is wrong and ignores the reality of a highly competitive microprocessor marketplace - characterised by constant innovation, improved product performance and lower prices. There has been absolutely zero harm to consumers”. (A.B./transl.rh)