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The Chips Are Down: EU Slams Intel with Record $1.45 Billion Fine

The Chips Are Down: EU Slams Intel with Record $1.45 Billion Fine

As expected, the European Commission has imposed a fine on chipmaker Intel for abusing its dominant position in the CPU marketplace and engaging in illegal rebates and other practices in order to squelch rival chipmaker AMD. What’s surprising is the size of the fine: €1.06 billion, which converts to roughly $1.45 billion U.S. dollars. The fine is the largest antitrust fine ever issued by the European Commission, substantially exceeding the €487 fine issued against Microsoft in 2004.

"Intel has harmed millions of European consumers by deliberately acting to keep competitors out of the market for computer chips for many years," said Competition Commissioner Neelie Kroes, in a statement. "Such a serious and sustained violation of the EU’s antitrust rules cannot be tolerated."

The European Commission found that Intel paid computer manufacturers to delay or cancel product built around CPUs from rival chipmaker AMD, and issued illegal rebates to both manufacturers and retails to convince them to favor products using Intel chips.

Intel has consistently denied any wrongdoing, and has already announced its intentions to appeal the ruling. "We do not believe our practices violated European law," said Intel president and CEO Paul Otellini, in a statement. "The natural result of a competitive market with only two major suppliers is that when one company wins sales, the other does not. The Directorate General for Competition of the Commission ignored or refused to obtain significant evidence that contradicts the assertions in this decision."

The Commission has ordered Intel immediately cease all illegal practices, in addition to paying the fine. Unlike the Commission’s years-long anticompetition action against Microsoft, Commissioner Kroes has indicated the EU’s antitrust sanctions would be carried out immediately, rather than suspended during a lengthy appeals process.

Intel has three months to pay the fine. Under European law, Intel may have gotten off easily: the EC could have fined Intel up to 10 percent of its annual revenue; instead the €1.06 billion amounts to just over four percent of the company’s 2008 revenue.

Some politicians and consumer advocates are hailing the EC’s ruling as a win for consumers, and a strong indication that the EU will not permit global multinational technology companies to shut rivals out of the European market. However, many industry watchers don’t generally expect the ruling to induce any significant changes in the way Intel conducts business with OEMs and retailers.

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