Intel Set for EU Judgment Day 5 Years After Record Fine

Intel Corp. (INTC)’s co-founder Gordon Moore reckoned the number of transistors crammed onto a chip will double every couple of years.

Moore’s law has worked its magic more than twice since Intel was ordered to pay a record 1.06 billion euro ($1.4 billion) fine for unfairly squeezing out rivals. The world’s biggest chipmaker will only tomorrow hear the outcome of its challenge at the European Union’s General Court.

After an eight-year probe, Intel was fined by the EU for giving computer makers rebates for buying most of their chips from the Santa Clara, California-based company, thwarting efforts by its nearest rival, Advanced Micro Devices Inc., to gain customers. The investigation was triggered by AMD’s complaint in 2000.

“We’ve said all along that we believe the commission was mistaken on multiple levels and that’s why we’ve decided to pursue this appeal,” said Chuck Mulloy, a spokesman for Intel, referring to the EU’s antitrust authority.

Responding to its May 2009 fine, the company said it “has never required a customer to agree not to buy from AMD in order to obtain a discount, nor raised a customer’s prices when it decided to buy from AMD.”

Intel went on to argue at hearings two years ago that EU regulators ignored exonerating evidence to build an “extreme case.” The European Commission was also faulted by the EU’s ombudsman for failing to take notes of a meeting with an executive from Dell Inc. That report wasn’t binding on the commission, which disagreed on the need for formal minutes.

Photographer: Ryan Anson/Bloomberg

After an eight-year probe, Intel was fined by the EU for giving computer makers rebates for buying most of their chips from the Santa Clara, California-based company, thwarting efforts by its nearest rival, Advanced Micro Devices Inc., to gain customers. Close

After an eight-year probe, Intel was fined by the EU for giving computer makers rebates... Read More

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Photographer: Ryan Anson/Bloomberg

After an eight-year probe, Intel was fined by the EU for giving computer makers rebates for buying most of their chips from the Santa Clara, California-based company, thwarting efforts by its nearest rival, Advanced Micro Devices Inc., to gain customers.

Evidence-Related

“If the court was to slap the commission’s fingers on evidence-related points, that would probably help practitioners in their cases,” said Damien Geradin, a lawyer at Covington & Burling LLP in Brussels. A loss for regulators “would probably force them to be a bit more careful.”

In the past 20 years, the EU hasn’t lost a monopoly abuse case at the Luxembourg courts that oversee it, Geradin said. This has created a dynamic where companies can “try the impossible” with a legal challenge at the EU courts or attempt to settle with regulators, who may be able to extract significant remedies.

Intel is one of a series of antitrust battles between the Brussels-based commission and U.S. technology giants.

Google Probe

Google Inc. is currently aiming to settle a more-than three-year EU investigation with an offer that may allay regulators’ antitrust concerns, if not all those of opponents that have complained about discrimination in the company’s search results. Microsoft Corp. has also struck a settlement with the EU to avoid a lengthy probe.

The Intel fine was more than double a 497 million-euro penalty against Microsoft in 2004. It represented about 4 percent of Intel’s 2008 sales of $37.6 billion, and was below the maximum penalty of 10 percent of annual sales.

The EU’s investigation found that Intel impeded competition by giving rebates to computer makers from 2002 until 2005 on the condition that they buy at least 95 percent of chips for PCs from Intel. It said Intel imposed “restrictive conditions” for the remaining 5 percent, supplied by AMD, which struggled to overcome Intel’s hold on the market for processors that run PCs.

The computer makers coaxed to not use AMD’s chips included Acer Inc., Dell, Hewlett-Packard Co., Lenovo Group Ltd. and NEC Corp., the commission said in 2009. The EU also said Intel made payments to electronics retailer Media Markt on the condition that it only sell Intel-based PCs. It also ordered Intel to stop using illegal rebates to thwart competitors, an instruction that Intel complained was unclear.

Civil Litigation

Intel settled an antitrust case with the U.S. Federal Trade Commission in August 2010 and agreed not to give computer makers discounts or other inducements in exchange for promises they will buy chips exclusively from Intel. It also agreed to pay AMD $1.25 billion in 2009 to end all civil litigation. Sunnyvale, California-based AMD is no longer involved in the EU court case.

Antoine Colombani, a spokesman for the commission, declined to comment on the case ahead of the court’s ruling.

Cases at the General Court usually take an average 26.9 months, according to statistics published by the court in March. Its decisions can be appealed to the EU’s Court of Justice, the bloc’s highest tribunal.

The case is T-286/09 Intel v Commission.

To contact the reporter on this story: Aoife White in Brussels at awhite62@bloomberg.net

To contact the editors responsible for this story: Anthony Aarons at aaarons@bloomberg.net Peter Chapman, Reed Stevenson

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