EU antitrust ruling against Intel due next Wednesday

The company faces a hefty fine and an order to change the way it does business

The European Commission is expected to make one of the most significant antitrust decisions in its history on Wednesday when it punishes computer chip-maker Intel for stifling competition from smaller rivals.

The official line is that the case is still ongoing, but one person close to the competition department said on condition of anonymity on Friday that the 27 commissioners will conclude the case, which has been under investigation since 2000, at their next weekly meeting on Wednesday.

Intel is the latest giant from the IT industry to be slapped down by Europe's top competition regulator. Like Microsoft five years ago and IBM in the 1980s, Intel claims it is simply doing what any company would, only better.

While IBM settled with the regulator, agreeing to change the way it competed in the market for mainframe computers, Microsoft and Intel have stuck to their guns. The two have applied similar strategies to dealing with the pesky authorities based in Brussels.

Consequently Microsoft was fined EUR497 million (US$663.4 million) for abusing its dominant position in the software market, plus an additional EUR1.2 billion for failing to respect the antitrust ruling.

Intel faces a fine of a similar order of magnitude for illegally handing out rebates to computer manufacturers in return for them buying the bulk of their x86 computer processing chips (CPUs) from Intel, the Commission is expected to say next week.

The company also stands accused of paying computer makers for scrapping or delaying the launch of machines fitted with chips made by its nearest rival AMD, and of selling its chips for server computers at below cost to large customers such as governments and universities.

Last year the Commission added fresh charges, accusing the chip giant of paying generous rebates to Media Markt, Europe's biggest chain of IT stores, in return for it de-listing all computers running AMD chips.

Intel dominates the personal-computer chip market by a mile. At the end of last year its market share stood at 81.9 percent, while AMD held 17.7 percent, according to IDC.

Technically, the Commission can fine a company up to 10 percent of its global sales the year before a monopoly abuse ruling. Last year Intel generated revenues of US$37.6 billion, which means the ceiling for a fine would be $3.76 billion. But the regulator has never applied a maximum fine to date.

The company has not been informed that a ruling is due next week. "We haven't heard anything officially, just rumors mostly coming from journalists," said Intel spokesman Robert Manetta.

And he repeated the company's standard line that its conduct is lawful, pro-competitive and beneficial to consumers.

Europe isn't the only region where Intel has run into trouble with antitrust authorities. In 2005 the company settled with Japan's competition office. Last year it was fined nearly $20 million in South Korea. Meanwhile, the company is under investigation in the U.S. by the Federal Trade Commission.

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Paul Meller

IDG News Service
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