EU Slams Itself Over Intel Case

Intel won at least a psychological victory last Friday when the ombudsman of the European Commission criticized the group for what he called “maladministration” in its antitrust case against Intel.

The EC had been investigating Intel for several years regarding complaints it had used strong-arm tactics to keep PC vendors from using AMD processors in their computers. In May, the EC levied a $1.45 billion fine against Intel, the largest fine by the EC ever.

According to an unpublished report obtained by The Wall Street Journal, EU ombudsman P. Nikiforos Diamandouros says the commission committed “maladministration” because it did not record a meeting with a Dell executive in August 2006.

The Dell (NASDAQ: DELL) executive, who was not identified, told commission investigators that the company decided not to use AMD processors due to “very poor” performance. The EC’s case against Intel (NASDAQ: INTC) has been an accusation of strong-arm tactics to keep a competitor out of the market, but here Dell was saying the problem was technical, not Intel pressure.

When Intel asked for a copy of the record of the meeting, the commission said it did not interview with the executive and that no minutes of the meeting were taken, according to the ombudsman’s report. It all paints to rather sloppy work on the European Commission’s part.

The ombudsman’s report will eventually be issued through his own Web site. Until that happens, Intel is keeping mum.

“Any comment from us at this stage would be inappropriate so we will not comment whatsoever,” said an Intel spokesman.

AMD speaks out

AMD (NYSE: AMD), on the other hand, isn’t buying it.

“The article states that the Dell interview took place in 2006, the same year that Dell ended its exclusive relationship with Intel and began offering Dell machines with AMD microprocessors. In short, it is unimaginable that a single statement from a single executive, made in the year in which Dell began to use AMD products, could possibly have any impact on the EC’s decision,” wrote an AMD spokesman in an e-mail to

The EU’s ombudsman’s task is to do just what he slammed the EC for doing; he investigates complaints about maladministration in the institutions and bodies of the European Union, which includes the EC. Unfortunately, he doesn’t have much power to put behind his findings, either.

“With the ombudsman making that statement, that means things will be looked at more carefully. That doesn’t mean the court will reverse the decision but it does swing the scales a little bit in Intel’s favor,” notes Martin Reynolds, vice president and research fellow with Gartner.

Jim McGregor, In-Stat‘s chief technology researcher , agreed that it helps Intel a little.

“If nothing else, it’s a good check and balance. This will force them to have their ducks in a row and it adds some fuel to Intel’s fire in trying to get some of these fines reduced,” he told

Not only does it help Intel but it could help other EU cases as well, such as Microsofts’. “It helps all companies with a case before the EU by saying ‘you’re being a little overzealous here.’ When you look at the fine they handed down on Intel, that was a bit overdoing it,” he said.

But Reynolds said the European Commission has no qualms about beating up on large, profitable American firms.

“They like to pick on big companies. It just so happens in tech we have a lot of big, high profit companies,” said Reynolds. “So there’s a lot of dollars sloshing around here. If you’re a European watching this, watching these American companies get socked with billions in fines, are you going to tell [the EC] to stop?” he said.

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