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Intel Defeat Over $1.4 Billion Fine Boosts EU Regulator

Photographer: Andrew Harrer/Bloomberg

The EU’s investigation found that Santa Clara, California-based 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. Close

The EU’s investigation found that Santa Clara, California-based Intel impeded... Read More

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Photographer: Andrew Harrer/Bloomberg

The EU’s investigation found that Santa Clara, California-based 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.

Intel Corp. (INTC) lost its fight against a record 1.06 billion euro ($1.4 billion) antitrust fine in a ruling that may embolden European Union regulators in other monopoly investigations.

The EU’s General Court rejected “in its entirety” Intel’s attempt to overturn the penalty for giving rebates to computer makers that favored its chips and shunned the products of its main competitor, Advanced Micro Devices Inc. (AMD)

“None of the arguments raised by Intel supports the conclusion that the fine imposed is disproportionate,” the court said. The size of the EU penalty “is at the lower end of the scale” for possible fines, it said.

The world’s biggest chipmaker’s defeat is a timely boost to the Brussels-based European Commission, which is embroiled in investigations over abuses of market power across the continent. These include a skirmish with Gazprom OAO (OGZD), Russia’s gas export monopoly -- suspected of charging unfairly high prices in central and eastern Europe -- and phone companies Orange SA (ORA), Deutsche Telekom AG (DTE) and Telefonica SA (TEF) in a case concerning control of Internet infrastructure.

The EU’s “broad approach is being upheld constantly” in court, meaning it has “great leeway” in both fining and finding against companies, said Pablo Ibanez Colomo, a law lecturer at the London School of Economics. “The commission will take it as meaning that probably it has more or less a free hand,” Ibanez Colomo said.

Google Accord

Joaquin Almunia, the current EU antitrust commissioner, is also hoping to seal an accord with Google Inc. (GOOGL), imposing changes on the world’s biggest search engine company in return for ending a probe over allegations it shut out rivals.

Today’s ruling “is significant because it confirms that the commission was fully justified in pursuing the anti-competitive conduct in question in a major worldwide market,” the EU authority said in a statement.

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

Intel’s criticism that regulators failed to record notes of a meeting with an executive from Dell Inc. “would not be such as to result in the court’s altering the amount of the fine,” the court said.

‘Complex Case’

Intel is “very disappointed,” said Sophie Jacobs, a spokeswoman for the company in Brussels. “This is a complex case and the decision reflects that.”

The Intel fine was more than double a 497 million-euro penalty against Microsoft Corp. 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 Santa Clara, California-based 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. The EU also ordered Intel to stop using illegal rebates to thwart competitors, an instruction that Intel complained was unclear.

U.S. Settlement

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.

The General Court’s 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

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