Intel Says EU Withheld Evidence in Antitrust Case

Intel Corp., the largest maker of computer chips, asked judges to overturn a record European Union 1.06 billion-euro ($1.34 billion) antitrust fine, arguing regulators withheld evidence and didn’t let Intel fully defend itself.

Intel told the EU General Court to throw out the European Commission’s ruling that its use of rebates violated EU antitrust rules. Intel said the EU failed to use mitigating evidence or to allow it respond to all of the allegations.

“The burden of proof on the commission is a heavy one” and “the commission simply has not met the burden of proof,” Nicholas Green, a lawyer for Intel, said to the court in Luxembourg. “The commission’s analysis is simplistic and static and fails to capture the dynamics of competition.”

The fine was levied after Advanced Micro Devices Inc. complained that the rebates were unfair. Santa Clara, California-based Intel agreed to pay AMD $1.25 billion in 2009 to end a U.S. lawsuit and the company reached a separate settlement with the U.S. Federal Trade Commission. Intel expects 2012 to be a year of “record revenues,” with growth in the mobile-phone market adding to its 80 percent market share for chips in personal computers.

‘Threatening Effect’

At the time, had companies such as Dell Inc. and Hewlett-Packard Co. turned to Intel rival AMD, it “would have had a threatening effect” so Intel shut out AMD, said commission lawyer Nicholas Khan. “The industry was rife with the sort of practices which were condemned by this decision.”

Intel’s appeal cites numerous errors with the EU decision, including its failure to make notes of a witness who was “highly likely” to provide evidence supporting Intel’s argument that its rebates to PC makers weren’t conditional on excluding AMD from the market. It also says the EU should have sought documents from AMD that were “potentially exculpatory” and given Intel an additional hearing to defend itself.

The competition ruling has already been criticized by the EU’s own ombudsman, who said in 2009 that the antitrust agency was guilty of “maladministration” for failing to record notes of the meeting with Dell. The report wasn’t binding on the commission, which disagreed on the need for formal minutes.

The antitrust fine was the EU’s biggest, more than double the 497 million-euro penalty against Microsoft Corp. in 2004. It represented about 4 percent of Intel’s $37.6 billion in sales in 2008, below the maximum penalty of 10 percent of yearly sales regulators can impose.

Procedural Grounds

Intel’s chances of getting the fine cut or canceled “lie more on procedural than on substantive grounds,” putting the focus on Intel’s arguments that regulators didn’t respect basic due process, said Alfonso Lamadrid, a lawyer at Garrigues in Brussels.

The EU’s eight-year 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 case may be less likely to affect the law on rebates because the EU’s approach on refunds linked to sales volumes has changed since the Intel case, with a greater emphasis on regulators proving that the alleged abusive behavior has concrete effects on competition.

Loyalty Reducing

“Traditionally, it was sufficient for the commission to show that the rebate had a loyalty-reducing effect to establish a violation of competition rules,” Lamadrid said. “In the Intel case, the commission claimed that negative effects on competition could be shown in the foreseeable future.”

The computer makers coaxed to not use AMD’s chips included Acer Inc., Dell, Hewlett-Packard, 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.

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.

Sunnyvale, California-based AMD, which initiated the EU antitrust case, is no longer involved and won’t intervene at this week’s hearing after settling with Intel.

The hearings are scheduled to last four days. Decisions by the EU court can be appealed a last time to the European Court of Justice, the 27-nation bloc’s highest court, which is also in Luxembourg.

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

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