Reports: Intel To Be Fined In EU Antitrust Case

Intel is set to be fined by the European Commission next Thursday and restricted in its partner rebate practices as an eight-year European antitrust investigation culminates in a major EC ruling, according to a growing number of media reports.

The EC will issue its ruling during the weekly meeting of the European Union executive on May 13, Reuters reported Thursday. The commission will rule that Santa Clara, Calif.-based Intel "breached antitrust rules and will fine it and order changes to how it provides rebates," according to Reuters.

An April Bloomberg report, which also claims that the EC will rule against Intel, describes a "ban" on Intel's partner rebates but does not elaborate.

The size of the fine that the commission will reportedly levy against Intel next week has not been reported. Earlier reports indicate that the maximum fine possible would be equivalent to 10 percent of Intel's annual revenue, which was $37.6 billion in 2008.

Intel has been under investigation by EU antitrust regulators since a 2001 complaint by Advanced Micro Devices, Intel's main rival in the x86 microprocessor market. The crux of the investigation has focused on accusations that Intel violated anticompetition rules by pressuring computer retailers not to sell AMD-based computers via retroactive rebates, with formal charges brought against Intel by the EU executive in 2007. AMD filed additional charges in 2008, claiming that Intel made outright payments to retailers to lock out AMD products.

The EC, which last February conducted dawn raids on Intel's offices in Germany and additional raids on the offices of Intel retail partners, has prepared a 500-page report on its findings against Intel, according to Bloomberg. The draft report has been shared with antitrust authorities in 27 EU countries, according to Bloomberg, which cites anonymous sources who have seen the document.

Intel legal spokesman Chuck Mulloy declined to comment Thursday on reports of an imminent EU ruling in the chip maker's antitrust case.

"Our policy is not to comment on rumors and speculations. We are not part of that process, so we have no comment," Mulloy said.

A spokesperson for Sunnyvale, Calif.-based AMD said "we won't speculate" on the ongoing EC investigation.

While mainstream reports were sparse in their details of what the EC's ruling might look like, a subscription-only assessment from the European market analysis firm MLex offered more color.

Next: More Details On Possible Fine Against Intel

An assessment from the UK-based analyst MLex describes a potentially devastating fine emerging from the EU ruling.

Intel's fine could be "in excess of 500 million euros" ($669 million), but could be suspended for up to five years as the case makes its way through European courts, according to MLex.

"Intel will be charged for having awarded fidelity rebates to some of the biggest names in computer manufacturing ... Dell and HP were among the companies who received payments in order to source all or most of their supplies from Intel, the commission will state," the MLex assessment claims.

"Intel made further illegal payments to major OEMs to postpone or cancel the launch of product lines based on CPUs from Intel's only rival of note, AMD. And yet another scheme of anticompetitive payments was in place with Media Saturn Holding, the holding company for the Media Markt consumer electronics chain, to sell only products with Intel inside, the commission will find."

Intel's troubles with EU regulators are not its only antitrust entanglements. Authorities in South Korea and Japan have also ruled against Intel in the past several years. The chip maker faces a complaint from AMD in the United States and an associated class-action suit, set to go to trial in Delaware in March 2010. The Federal Trade Commission and the New York state attorney general's office are also investigating Intel on antitrust grounds.

The case against Intel in the U.S. also involves allegations of pressuring OEMs, retailers and small system builders to fully or partially spurn AMD products in return for rebates, cash payments, discriminatory pricing or the withholding of marketing funds. AMD's summary of its complaint in the Delaware court alleges that "Intel's economic coercion is pervasive and extends to customers at all levels of the x86 ecosystem -- from large computer or original equipment manufacturers (OEMs) like Hewlett-Packard, to small system-builders, to wholesale distributors, to retailers such as Circuit City."

In fact, AMD's complaint reads like a who's-who of the PC industry, with companies alleged to have been pressured by Intel including HP, Circuit City, Best Buy, Dell, Sony, Toshiba, Gateway, Hitachi, NEC, Acer and Fujitsu. While most of the evidentiary materials in the ongoing Delaware case remain under seal, interesting details have emerged, such as the deposition of Dell CEO Michael Dell in February.

What effect, if any, could a potential EC ruling against Intel have on the ongoing antitrust proceedings in the Delaware court? The U.S. court could find the EC's conclusions "of interest if not legally binding," said Albert Foer, president of the American Antitrust Institute.

"[The U.S. court] isn't bound by any foreign laws or the findings of a foreign court. But the lawyers' strategies, in terms of trying to settle a case, are affected by the increasing number of international jurisdictions that are finding against Intel," he said.

"How many times will Intel want to bump its head up against another court, when they keep finding the same facts and interpreting them the same way?"