EU fines Intel $1.4B, says it paid OEMs, retailer to exclude AMD products

For years, the evidence against Intel with regard to its business conduct in Europe has been treated as allegation, especially by anyone in the press with any serious intent of showing fairness. As of today, at least in Europe, it's no longer an allegation: Intel cheated, says the European Commission this morning, in a decision that can best be described as the worst-case scenario for Intel coming to fruition.

This morning, the EC found that for a 62-month period beginning in October 2002, Intel paid German retailer MediaMarkt, which operates stores primarily in Germany and Russia (not an EU member), to sell Intel-based computers exclusively in its retail outlets. This based on evidence turned up during a February 2008 raid of Intel's German offices.

And in instances that were already at the heart of AMD's civil antitrust lawsuits against Intel in the US and abroad, the Commission ruled that Intel made rebates throughout the same period to five major computer manufacturers, based on conditions that are illegal under European law. It's not the rebates themselves that are illegal, the EC made clear, but rather the fact that they were tied to the recipients' keeping their promise to limit their shipments of AMD-based products in key categories from as little as 20% of their overall sales, to as little as zero.

In deference to those recipient companies, the EC this morning left out their identities with regard to specific charges. But it did reveal their names collectively, and it's the names we'd expected since AMD's 2005 civil suit against Intel began: Acer, Dell, HP, Lenovo, and NEC. In explaining the events of Intel's misconduct, the EC referred to these companies in random order, calling them computer makers "A," "B," "C," "D," and "E."

If we piece together some of the news that happened during the relevant period, their identities may perhaps be easily sorted out. For example, according to the EC's statement this morning, "Intel made payments to computer manufacturer E provided that this manufacturer postponed the launch of an AMD-based notebook from September 2003 to January 2004." Taiwanese industry daily DigiTimes had covered the market extensively during this period. Its reporting (excerpted here) showed that Acer delayed the introduction of AMD Mobile Athlon 64-based notebooks past the period the CPUs were introduced -- September 2003 -- until after the holidays.

In a statement this morning from EC Commissioner for Competition Neelie Kroes, she points out that it's the behavioral stipulations that made Intel's rebates illegal: "Not all rebates are a competition problem -- often they will lead to lower prices for consumers in the long term as well as the short," stated Comm. Kroes. "But the Intel rebates in this case were a problem because of the conditions that Intel attached to its rebates. Moreover, the Commission has examined closely whether an efficient competitor could have matched these rebates. These conditions, to buy less of AMD's products or to not buy them at all, prevented AMD from competing with Intel on the merits of its products. This removed the possibility of genuine choice for consumers and undermined innovation."

Citing a case that AMD itself brings up frequently, the EC this morning mentioned how Intel offered "one computer manufacturer" millions of free CPUs only to have that offer turned down. Unfortunately, that particular manufacturer wasn't mentioned by letter, because due to the high publicity surrounding the US civil antitrust suit, we know that manufacturer to be HP.

Leading to the Commission's decision to fine Intel €1.06 billion, according to Kroes, was evidence she said pointed to Intel attempting to cover up for its conduct.

"The Commission Decision contains evidence that Intel went to great lengths to cover-up many of its anti-competitive actions. Many of the conditions mentioned above were not to be found in Intel's official contracts," she stated. "However, the Commission was able to gather a broad range of evidence demonstrating Intel's illegal conduct through statements from companies, on-site inspections, and formal requests for information."

Further comments from Intel officials are expected later this morning, and Betanews will follow up shortly afterward.

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