European Commission brings new charges against Intel

The European Commission yesterday (17 July) hit Intel a second set of anti-trust charges within a year.

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The European Commission yesterday (17 July) hit Intel a second set of anti-trust charges within a year.

The new charges "reinforce the Commission's preliminary view ... that Intel has infringed rules on abuse of dominant position with the aim of excluding its main rival AMD from the x86 central processing units market," the Commission said.

Describing it as a "supplementary statement of objections" (SSO), the Commission's latest charge sheet focuses on three new elements of alleged abusive conduct that have occurred since it sent its first statement of objections to Intel last July. The new charges will be incorporated into the existing lawsuit.

Intel paid large rebates to a leading European PC retailer that depended on it selling only Intel-based PCs, the Commission said. The retailer isn't named but is understood to be Media Markt, one of Europe's biggest chains of PC shops.

In addition, Intel made payments to induce a leading OEM (original equipment manufacturer) to delay the planned launch of a product line incorporating an Advanced Micro Devices-based CPU. Again the OEM wasn't named.

The third charge is for paying big rebates to that same OEM that were dependent on it obtaining all of its laptop CPU requirements from Intel, the Commission said.

Besides the new charges, the Commission also added evidence supporting the original charges it made against the company a year ago.

After reviewing the new statement of objections, Intel issued a statement saying, "the issuance of a second SO suggests that the Commission supports AMD's position that Intel should be prevented from competing fairly and offering price discounts which have resulted in lower prices for consumers ... It's clear that the allegations stem from the same set of complaints that our competitor, AMD, has been making to regulators and courts around the world for more than 10 years."

Intel remains "confident that the worldwide microprocessor market is functioning normally and is highly competitive," the company said. "Intel's conduct has always been lawful, pro-competitive and beneficial to consumers." The company's response to the Commission's charges will show the allegations are "unfounded," Intel said.

It set forth some likely arguments it will make to the Commission: "consumers have benefited from prices that have gone down significantly, output has increased many times over and the performance of products, including ours, has improved exponentially."

The latest charges demonstrate that anti-trust regulators worldwide are focused on protecting consumers from Intel's anticompetitive behaviour, said Tom McCoy, AMD's vice president of legal affairs and chief administrative officer.

"Intel has paid a leading retailer to turn away AMD-based computers from leading global computer manufacturers, which can only be regarded as robbing consumers of their fundamental right to choose," McCoy said.

Intel has eight weeks to reply in writing to the SSO. It will then be allowed to defend itself in front of the Commission, AMD and other interested parties in a closed-door hearing.

If, after this procedure, the Commission still believes Intel is guilty, it will issue a ruling ordering the company to change its business practices in Europe. It may also impose a fine of up to 10 percent of Intel's global annual sales, which last year stood at nearly US$40 billion.

Intel faces greater risk in the EU than in the U.S. because European courts take a tougher stance on the misuse of rebates and heavy discounts, said Professor Keith Hylton, an anti-trust expert at Boston University. Such cases are harder to prove in the US.courts, he said.

In Europe, if the price being charged is below average costs, the presumption is made that the defendant was involved in predatory pricing, Hylton said. In the US, the plaintiff has to prove predatory pricing by looking at cost, market conditions and the business harm suffered by competitors.

(Nancy Weil and Agam Shah contributed to this report.)

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