Intel’s $1.3 Billion Rebate Fine Based on EU ‘Experiment’

Intel Corp. was used as a guinea pig by regulators who imposed a 1.06 billion-euro ($1.3 billion) fine for using rebates to block rivals based on an unproven case, company lawyers told a European Union appeals court.

The European Commission’s 2009 decision to levy the biggest-ever antitrust fine against a single company was based on mistakes and ignored evidence, Intel lawyers have told the EU General Court in Luxembourg over four days of hearings.

“The commission used Intel as its laboratory experiment” to try out an economic analysis that served as the foundation for an erroneous decision, Nicholas Green, a lawyer for Intel, told the EU’s second-highest court on the final day of hearings. “It’s as easy to find legal certainty in this case as it is for scientists to discover the Higgs boson.”

The EU probe concluded Intel impeded competition to cut Advanced Micro Devices Inc. out of the market by giving computer makers rebates from 2002 until 2005 on the condition that they buy at least 95 percent of their chips for personal computers from the Santa Clara, California-based company. Intel imposed “restrictive conditions” for the remaining 5 percent, supplied by AMD, which struggled to overcome Intel’s hold on the PC processor market, the EU said. The infringement continued until at least December 2007, the EU said.

The EU began investigating after AMD complained in 2000. Intel agreed to pay AMD $1.25 billion in 2009 to end all civil litigation. Sunnyvale, California-based AMD is no longer involved in the case and didn’t participate this week.

Intel ‘Well-Aware’

The Brussels-based regulator rejected that there was no intentional infringement, saying Intel “was well-aware” its actions were anti-competitive, lawyer Vittorio Di Bucci said.

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 of 10 percent of annual sales.

The fine was “relatively low compared with the size of the company and of the market concerned,” Di Bucci told the five-judge panel. The commission set the amount after a “series of prudent choices” that were all in Intel’s favor.

Industry group Association for Competitive Technology, which counts Microsoft Corp. among its members and supported Intel’s appeal, warned about “the increasing level of fines” in the information technology sector.

“Crossing the symbolic line of 1 billion euros may have played a role in the determination of this particular fine,” ACT lawyer Jean-Francois Bellis said.

The commission “has absolutely nothing against IT companies,” Di Bucci said. “It just turns out that some of these companies are very large indeed and when they commit abuses they may attract very large fines.”

Any decision by the EU General Court can be appealed to the EU Court of Justice in Luxembourg.

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

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