June 5 (Bloomberg) -- Intel Corp., the world's biggest chipmaker, was fined about 26 billion won ($25 million) by South Korea's antitrust regulator for offering discounts to prevent customers from buying products from Advanced Micro Devices Inc.

Rebates to Samsung Electronics Co. and Trigem Computer Inc. breached antitrust rules, the Korea Fair Trade Commission said today in a statement. Intel will probably appeal the ruling, General Counsel Bruce Sewell said in a phone interview.

The verdict is a setback for Santa Clara, California-based Intel as it awaits a ruling from the European Union, where regulators can fine companies up to 10 percent of annual sales for antitrust breaches. In 2005, Japan forced Intel to remove clauses restricting Japanese computer makers from using rival chips. Intel has also been sued by Advanced Micro in the U.S.

``An investigation in Korea invariably has some effect on the outcome of investigations in the United States, in the EU and elsewhere,'' said Brendon Carr, a business attorney at the law firm of Hwang Mok Park in Seoul. ``Every domino that falls is a painful one for a global enterprise.''

Intel offered about $37 million in rebates over 2 1/2 years to Samsung and Trigem on the condition that they wouldn't buy from Advanced Micro, according to commission's statement.

The practice helped Intel's market share average at 91.3 percent in the five years ending in 2005 in Korea, higher than 79.6 percent globally, according to the statement.

Rebate Dispute

The commission's description of the funds from Intel is a ``stretch'' because they were used to jointly market products, Trigem said in an e-mailed statement. Samsung Electronics spokesman James Chung declined to comment.

The Korean regulator ``has this bizarre notion that we were forcing customers to be exclusive, when the facts, indisputably, are that they were not exclusive,'' Sewell said. ``We'll never do something that violates Korean law. We don't believe we have ever done that.''

Sewell said the Korean ruling is ``very unlikely'' to have broader implications.

The European Commission, the 27-nation bloc's executive branch overseeing antitrust regulations, accused Intel in July 2007 of abusing its dominance to wrest sales from Advanced Micro. Intel had sales of $38.3 billion last year, or six times Advanced Micro's latest annual revenue.

European Commission

The Financial Times Deutschland reported last month that the European Commission had reached a decision on its Intel investigation and may forbid the U.S. chipmaker from providing subsidies to retailers for advertising expenses in return for exclusivity. The commission denied the report then and said its investigation is continuing.

The European Commission may be a larger threat to Intel than antitrust authorities in the U.S. because the European Union ``is more concerned about the structure of the market than the U.S. and they worry much more about companies taking out their competitors,'' said Mark Williams, associate professor of law at Hong Kong Polytechnic University. ``In the U.S., antitrust authorities don't normally interfere in conduct of this type.''

In February, European Union regulators fined Microsoft Corp., the world's largest software maker, a record 899 million euros ($1.4 billion) for failing to comply with a 2004 antitrust order.

Separately, Sunnyvale, California-based Advanced Micro sued Intel in a Delaware court in June 2005, alleging that Intel unlawfully kept its monopoly in the microprocessor market by threatening customers from dealing with Advanced Micro.

In a statement, Advanced Micro welcomed today's ruling, calling the Korean commission a ``premier antitrust body in exposing Intel's anticompetitive practices.''

To contact the reporters for this story: Kyung Bok Cho in Seoul at kcho7@bloomberg.net; Mark Lee in Hong Kong at wlee37@bloomberg.net.

Last Updated: June 5, 2008 03:29 EDT