EC Levies Antitrust Charges at Intel

The European Commission (EC) preliminarily charged Intel, the world’s largest
chipmaker, today with antitrust behavior toward rival AMD, accusations that Intel was quick to deny.

According to the EC, the Santa Clara, Calif.-based Intel
conditioned rebates to original equipment manufacturers (OEM) on the OEM’s
buying most of their chips from Intel and, in a number of instances, made
direct payments to OEMs to either delay or cancel the launch of a new product
line featuring AMD chips.

In addition, the EC said Intel offered below-market prices on server chips in
hopes of undermining AMD bids.

“These three types of conduct are aimed at excluding AMD…from the market.
Each of them is provisionally considered to constitute an abuse of a dominant
position in its own right,” the EC said in a statement. “However, the
commission also considers at this stage of its analysis that the three types
of conduct reinforce each other and are part of a single overall
anti-competitive strategy.

Intel noted the case is based on complaints from a direct competitor rather
than customers or consumers.

“We are confident that the microprocessor market segment is functioning
normally and that Intel’s conduct has been lawful, pro-competitive and
beneficial to consumers,” Bruce Sewell, Intel’s senior vice president and
general counsel, said in a statement.

Intel has 10 weeks to reply to the complaint. If the EC decides the
preliminary complaint is valid, it may require Intel to cease the antitrust
practices and impose a fine.

“While we would certainly have preferred to avoid the cost and inconvenience
of establishing that our competitive conduct in Europe has been lawful, the
commission’s decision…means at last Intel will have the opportunity to hear
and to respond to the allegations made by our primary competitor,” Sewell

AMD, the Sunnyvale, Calif.-based archrival of Intel, said in a statement the
EC charges suggest that Intel is engaging in monopolistic behavior.

“Consumers know today that their welfare has been sacrificed in the illegal
interest of preserving monopoly profits. Intel has circled the globe with a
pattern of conduct, including direct payments, in order to enforce full and
partial boycotts of AMD,” said Thomas M. McCoy, AMD executive vice president
for legal affairs and chief administrative officer.

In 2005, Japan’s Fair Trade Commission ruled Intel was in violation of the
country’s antitrust laws when it attempted to force full or partial
exclusivity for Intel chips with five Japanese PC makers. South Korea
currently has an active investigation underway about Intel’s business

Also in 2005, EC regulators raided several
of Intel’s European offices as part of ongoing investigation of Intel. The
raids came in the wake of an AMD antitrust complaint against Intel in the U.S.

In the U.S. case, AMD
accuses Intel of unlawfully establishing a monopoly in the x86 microprocessor
market by shunting customers away from AMD. The lawsuit claims Intel paid Dell
and Toshiba not to do business with AMD and paid Sony for an exclusive

AMD also claims Intel forced NEC, Acer and Fujitsu into partial exclusivity
agreements by offering rebates to those who agreed to limit or forgo AMD
purchases. The chipmaker also said Intel paid NEC several million dollars for
caps on NEC’s purchases from AMD.

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