E.U. Fines Intel for Antitrust Violations

By Cecilia Kang
Washington Post Staff Writer
Thursday, May 14, 2009

The world's biggest semiconductor maker yesterday was fined a record $1.45 billion by European regulators for allegedly using its dominance to edge out rivals, a decision that has cast a spotlight on similar investigations by U.S. antitrust watchdogs.

After a five-year review of Intel's sales tactics, the European Union's competition commission said the company, with 70 percent share of the global chip market, gave hidden discounts to computer makers to use its chips and paid the firms not to use those made by competitor Advanced Micro Devices. It also paid a major retailer to stock only computers outfitted with Intel chips, the commission said.

The decision comes just days after the Obama administration announced that it would step up enforcement against companies that violate rules on anti-competitive behavior. The United States has faced years of criticism that regulators have been slow to respond to complaints that Intel used anti-competitive business practices to shut out AMD. But last year, both the Federal Trade Commission and New York attorney general launched separate investigations of Intel.

AMD has filed a separate civil suit against Intel in Delaware that is expected to go to court next year.

Neelie Kroes, head of the European Commission's competition bureau, said yesterday's record fine reflected the conclusion that Intel's practices hurt consumers who were offered fewer technological choices and that the company's actions "frustrated innovation." She ordered Intel to stop its practices immediately.

"Given that Intel has harmed millions of European consumers by deliberately acting to keep competitors out of the market for over five years, the size of the fine should come as no surprise," Kroes said.

Intel said in a statement that the commission's decision failed to acknowledge how such companies operate and said it would appeal.

"We believe the decision is wrong and ignores the reality of a highly competitive microprocessor marketplace," said Paul Otellini, Intel president and chief executive. "There has been absolutely zero harm to consumers."

The findings follow similar actions in South Korea and Japan against Intel, which antitrust experts have been watching closely for their potential impact on U.S. enforcement against anti-competitive behavior of big companies with majority market shares in their industries.

The FTC declined to comment on the E.U. decision, but some antitrust experts said President Obama's pick of Jon Leibowitz to lead the agency may say much about how it might handle similar cases. Leibowitz is known for championing consumer protections, and as a FTC commissioner he pushed for greater enforcement of antitrust violations.

"This is the beginning of the beginning," said Tom McCoy, AMD executive vice president of legal affairs.

The FTC's review of Intel -- and its conclusion -- may be the first test of whether the administration lives up to its promise to be more aggressive on the enforcement of competition.

"Now you have a third and very important international authority that has looked at the same things and have come to a clear and unanimous decision," said Albert Foer, president of the American Antitrust Institute. "It would be disappointing if the FTC verged from that point of view and the pressure would be on them to explain why they weren't judging in the same way."

Antitrust experts note that the FTC has worked closely with E.U. regulators. The European Commission said in a news release that its competition bureau and the FTC have "kept each other regularly and closely informed on the state of play of their respective Intel investigations."

By sharing documents and communicating insights, the FTC isn't expected to take as long as E.U. regulators to come to conclusions on their review, said Ed Black, president of the high-tech trade group Computer & Communications Industry Association. AMD is a member of the CCIA; Intel is not.

"So there should not be the need for a such a long period of time to lapse before a conclusion by the FTC," Black said.

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