European Commission: Intel Used Rebates To Stop PC Makers From Using AMD Processors

The Commission said that the decision, handed down in May, found that Intel broke EC Treaty antitrust rules by engaging in two types of illegal practices to exclude competitors from the market for x86 CPUs.

The EC also said that Intel gave wholly or partially hidden rebates---conditional and so-called "naked" restrictions---to computer makers Dell, HP, NEC, and Lenovo on the condition that they bought all, or almost all, their x86 CPUs from Intel. In addition, the EC said that Intel also made direct payments to Europe's largest PC retailer---Media Saturn Holding---on the condition that the retail giant only sell computers with Intel x86 CPUs.

Intel was also found guilty of making direct payments to computer manufacturers---HP, Acer, Lenovo---to stop or delay the launch of specific products containing AMD'sx86 CPUs and to limit the sales channels available to these products, the EC said.

"Intel sought to conceal its practices and how computer manufacturers and Intel itself recognized the growing threat represented by the products of Intel's main competitor, AMD," said Neelie Kroes, European Commissioner for Competition, in a statement. "By undermining its competitors' ability to compete on the merits of their products, Intel's actions undermined competition, reduced consumer choice and hindered innovation."

In a statement released Monday, AMD applauded the EC.

"This is the first time that Intel has had to confront now publicly available facts of its illegal behavior and it won't be the last," said Tom McCoy, AMD executive vice president, Legal Affairs. "The U.S. FTC and New York Attorney General's continuing investigations and AMD's civil case against Intel will provide other clear demonstrations of Intel breaking the law, and we remain confident that we will win our US civil case against Intel, which goes to trial in March."

AMD first filed a formal complaint with the EC against Intel 2000 in what it alleged were antitrust practices. The chip giant made more specific allegations against Intel in 2003, prompting the EC to launch an investigation, which included on-the-spot investigations at Intel locations in the U.K., Germany, Italy, Spain and France. The Commission also made spot inspections at various European retail outlets.

"It is important to note that there are only two meaningful players on the market for x86 CPU production, Intel and AMD," the EC explained in its May decision. "In other words, the abusive practices of Intel aimed at the elimination or the restriction of the access to the market of the only competitor of a dominant company. Furthermore, as x86 CPU production requires heavy initial and then continuous investments, entry is difficult. Therefore, it is likely that in case AMD were to be eliminated or marginalized, there would be no credible potential entrant in this market. Moreover, it has been established that Intel is an unavoidable trading partner for all major OEMs."

Fighting back, Intel contends that the EC made serious errors in its investigation and subsequent proceeding and has appealed the fine.

"The Directorate General for Competition of the Commission ignored or refused to obtain significant evidence that contradicts the assertions in this decision," said Intel president Paul Otellini in a statement in May. "We believe the decision is wrong and ignores the reality of a highly competitive microprocessor marketplace " characterized by constant innovation, improved product performance and lower prices. There has been absolutely zero harm to consumers. Intel will appeal."