EU imposes record fine on Intel

The European Commission has imposed a record €1.06bn ($1.45bn) fine on chipmaker Intel on Wednesday and ordered it halt illegal rebates and other practices to squeeze out rival AMD.

“Intel has harmed millions of European consumers by deliberately acting to keep competitors out of the market for computer chips for many years,” European Union Competition Commissioner Neelie Kroes said in a statement.

The EU executive said Intel paid computer makers to postpone or cancel plans to launch products that used AMD chips, paid illegal, secret rebates so computer makers would use mostly or entirely Intel chips, and paid a major retailer to stock only computers with its chips. It ordered Intel “cease the illegal practices immediately to the extent that they are still ongoing”.

Intel may continue to offer rebates, so long as they are legal, the Commission said. The EU antitrust fine is the biggest imposed on an individual company, exceeding an €896m euro penalty last year against glass maker Saint-Gobain for price fixing, and a €497m euro fine in 2004 on Microsoft for abuse of dominance.

The commission investigated practices dating back to 2002, and said Europe accounted for 30 per cent of Intel’s current worldwide €22bn market. The commission said Intel must pay the fine, which represents 4.15 per cent of the company’s 2008 turnover, within three months of the date of the notification of the decision. Intel has two months to file an appeal.

Intel, whose microprocessors power eight out of every 10 PCs in the world, posted first quarter sales of $7.1bn. Analysts estimated the company enjoys a sizeable cash balance, generating close to $10bn in cash last year.

The decision comes against the background of a renewed determination by the US to pursue dominant companies that use their power to crush rivals. The US Justice Department’s antitrust chief, Christine Varney, announced this week she “will be aggressively pursuing” such abuse.

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