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European Commission imposes €1.06bn fine on Intel

On 13 May 2009 the European Commission confirmed it has imposed a fine of €1.06bn on Intel for abusing its dominant position on the market for x86 CPU (central processing unit) computer chips from October 2002 to December 2007.  This is the first time the European Commission has in a single decision imposed a fine over €1 billion for breach of the EU competition rules and dwarfs the €497.2 million fine imposed on Microsoft in March 2004 for its abuse of dominance in the PC operating systems market (although Microsoft was fined substantial additional amounts for failure to comply with this decision).

According to the European Commission, the following two business practices constituted infringements of EU antitrust rules:

• rebates to computer manufacturers on condition that they buy all, or almost all, of their x86 CPUs from Intel; and
• direct payments to computer manufacturers to halt or delay the launch of specific products containing competitors’ x86 CPUs and to limit the sales channels available to these products.

The European Commission concluded that these strategies discouraged computer manufacturers from using the products of Intel’s rivals and also reduced consumer choice by weakening Intel’s rival manufacturers’ ability to compete and innovate.

Rebates do not always cause competition law problems, but the European Commission stressed that it was the conditions attached to the rebates proposed by Intel which were the problem in this case.

The European Commission’s investigation followed complaints by rival chip-maker AMD.

In this case it is notable that the European Commission’s proof for the existence of many of the illegal conditions was not explicitly found in Intel’s contracts.  The European Commission appears to have found evidence of these conditions in e-mails obtained during dawn raids, in responses to formal requests for information and in formal statements to the European Commission made by the other companies concerned (presumably this refers to certain named Intel customers, Intel’s rival AMD and a named retailer of computers).  This will no doubt have added to the complexity of the Commission’s investigation but did not deter it from pursuing the allegations.

It remains to be seen as soon as the text of the decision is made public how the European Commission applied its recent guidelines on the enforcement of Article 82 to assess the objected business practices. 

In addition, the level of the fine imposed on Intel shows the European Commission is not making any concessions to the economic downturn in its enforcement of EU competition law.

Please click here for the European Commission press release.

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