Intel Fined $1.45 Billion in EU Antitrust Case Over Rebates
By Matthew Newman
May 13 (Bloomberg) -- European Union regulators levied a record 1.06 billion-euro ($1.45 billion) fine against Intel Corp., the world’s biggest computer-chip maker, and ordered the company to stop using illegal rebates to thwart competitors.
Following an eight-year investigation, the European Commission found that Intel impeded competition by giving rebates to computer makers that buy all or almost all of their chips from Intel. The penalty is the biggest antitrust fine in the 27-nation EU’s history, more than double the 497 million- euro penalty against Microsoft Corp. in 2004.
The commission’s attack on rebates may increase Intel’s troubles as computer sales decline amid the global economic crisis. Advanced Micro Devices Inc., which originally filed the antitrust complaint in the EU case, gained market share in the first quarter, researcher IDC said.
“AMD will be throwing a party today,” said Wim Zwanenburg, a fund manager at Bank Degroof Group, which oversees 23 billion euros including Intel shares. “It’s a bit like David versus Goliath for them.”
The EU said Intel gave rebates to computer makers from 2002 until 2005 on the condition that they buy at least 95 percent of chips for PCs from Intel. The commission said the Santa Clara, California-based company imposed “restrictive conditions” for the remaining 5 percent, supplied by AMD.
Intel will appeal the commission’s decision to a European court in Luxembourg, said Bruce Sewell, Intel’s general counsel, in a telephone interview.
‘Improper and Incorrect’
“The decision is improper and incorrect,” said Sewell. “We have never refused to sell to a company and we have never required that a company not buy from AMD.”
Intel rose 3 cents to $15.24 at 9:58 a.m. New York time in Nasdaq Stock Market trading. AMD rose 19 cents, or 4.4 percent, to $4.54 in New York Stock Exchange composite trading.
EU Competition Commissioner Neelie Kroes said that Intel’s conduct harmed millions of consumers by trying to keep competitors out of the market. Intel kept its market share at about 80 percent by giving rebates to computer makers that bought all or most of their chips from the company, the commission said.
“Such a serious and sustained violation of the EU’s antitrust rules cannot be tolerated,” she said in a statement.
Acer, Dell
The computer makers that were coaxed to not use AMD’s chips included Acer Inc., Dell Inc., Hewlett-Packard Co., Lenovo Group Ltd. and NEC Corp., the commission said.
The commission also said Intel made payments to electronics retailer Media Markt on the condition that it only sell Intel- based PCs. The EU has evidence that Intel “went to great lengths” to cover up its illegal practices and the conditions weren’t in the company’s contracts, Kroes said.
“The Commission was able to gather a broad range of evidence demonstrating Intel’s illegal conduct through statements from companies, on-site inspections, and formal requests for information,” Kroes said.
The 1.06 billion-euro fine is the highest issued by the EU, surpassing an 896 million euro fine against Cie. de Saint-Gobain SA in a cartel case in November. The 497 million-euro penalty against Microsoft came in an abuse of dominance case, the same cause of action as the EU’s against Intel.
“The fine is clearly designed to grab people’s attention,” said Michael Reynolds, an antitrust lawyer at Allen & Overy LLP in Brussels.
The penalty represents about 4 percent of Intel’s $37.6 billion in sales last year, the commission said. Intel had $12.8 billion in cash, debt instruments included in trading assets, and short- and long-term investments as of March 28, the company said last month.
‘Lingering’ Issues
While the amount of the fine won’t affect Intel, continuing EU oversight may be an issue for the company, said Michiel Plakman, a fund manager in Rotterdam at Robeco NV, which oversees the equivalent of $150 billion including Intel shares.
“These sorts of issues keep lingering, just like with Microsoft,” Plakman said. “As soon as you caught Brussels’ interest, it’s going to be like that for a while and I don’t think Intel will let this slide.”
The EU regulator said Intel’s unlawful practices must stop immediately and that it would “actively monitor Intel’s compliance with this decision.”
“What’s important isn’t just the monetary penalty, but the real penalty is the injunctive relief,” said David Balto, a former U.S. Federal Trade Commission policy director who investigated and litigated a case against Intel in the 1990s.
“The EU recognized that the market is broken because of Intel’s bullying tactics,” said Balto, now a lawyer at the Lex Group in Washington.
Giuliano Meroni, president of AMD’s European unit, said in a statement that the decision “will shift the power from an abusive monopolist to computer makers, retailers and above all PC consumers.”
To contact the reporters on this story: Matthew Newman in Brussels at Mnewman6@bloomberg.net.
Last Updated: May 13, 2009 10:01 EDT
No comments:
Post a Comment