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EU slams Intel with $1.45-B fine

Orders halt to illegal sales tactics

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BRUSSELS -- The European Union fined Intel Corp. a record euro1.06 billion (US$1.45 billion) on Wednesday and ordered the world's biggest maker of computer chips to stop illegal sales tactics that shut out Silicon Valley rival AMD.

The fine, which exceeded a euro899 million monopoly abuse penalty imposed on Microsoft Corp. last year, was denounced by Intel, which plans to appeal to an EU court within 60 days.

AMD's stock jumped in midday trading Wednesday, while Intel shares were up slightly.

"Given that Intel has harmed millions of European consumers by deliberately acting to keep competitors out of the market for over five years, the size of the fine should come as no surprise," said EU Competition Commissioner Neelie Kroes.

"Intel did not compete fairly, frustrating innovation and reducing consumer welfare in the process," she said.

The European Commission also told Intel to immediately cease some sales practices in Europe, though it refused to say what those were. Intel said it was "mystified" about what it was supposed to change but would comply with the "extremely ambiguous" EU order.

Intel, based in Santa Clara, Calif., has about 80 per cent of the world's personal computer microprocessor market and faces just one real rival, Advanced Micro Devices Inc., which has its headquarters just three miles from Intel in Sunnyvale, Calif.

The two companies have been fighting for years over what AMD claims is Intel's intimidation of computer makers into striking exclusive deals for the chips they use in their new machines.

AMD claims the rebates and financial incentives that Intel offers to those companies for buying more Intel chips are designed to prevent AMD from gaining market share.

AMD argues that Intel's volume discounts are sometimes so steep that AMD can't cut its own prices enough to compete without losing money on the sales.

In siding with AMD to wrap up an eight-year probe, the European Commission said Intel broke EU competition law by exploiting its dominant position, thereby limiting customer choice.

The EU said Intel gave rebates to computer manufacturers Acer Inc., Dell Inc., Hewlett-Packard Co., Lenovo Group Ltd. and NEC Corp. for buying all or most of their chips from Intel and paid them to stop or delay the launch of computers based on AMD chips.

The commission said price discounts were linked to promises from computer manufacturers to restrict AMD purchases.

It said such discounts were left off Intel's official contracts because the company "went to great lengths to cover up many of its anticompetitive actions."

Officials said they learned of them through e-mails and statements from businesses, some seized during surprise raids.

Bruce Sewell, Intel's general counsel, said the case was based on weak evidence and unfair inferences from a small number of documents.

Intel president and CEO Paul Otellini said "there has been absolutely zero harm to consumers."

But AMD chief executive Dirk Meyer said the decision was "an important step toward establishing a truly competitive market."

"AMD has consistently been a technology innovation leader and we are looking forward to the move from a world in which Intel ruled, to one which is ruled by customers," Meyer said in a statement.


-- The Associated Press

Republished from the Winnipeg Free Press print edition May 14, 2009 B7

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