EU hits Intel with record €1b fine

Europe's antitrust regulators have imposed a record €1.06 billion fine on Intel, finding the company abused its dominant market position.

The European Commission also ordered Intel to “cease illegal practices” immediately.

“Intel has harmed millions of European consumers by deliberately acting to keep competitors out of the market for computer chips for many years. Such a serious and sustained violation of the EU's antitrust rules cannot be tolerated,” Competition Commissioner Neelie Kroes said.

The fine - which is more than a third higher than the EC's previous maximum €497 million penalty levied on Microsoft in March - represents 4.15% of Intel's turnover for 2008. The EC is empowered to fine companies up to 10% of their annual revenue.

Intel said it would appeal the verdict. “Intel takes strong exception to this decision,” Intel CEO Paul Otellini said. “We believe the decision is wrong and ignores the reality of a highly competitive microprocessor marketplace. There has been absolutely zero harm to consumers.”

The commission ruled that Intel gave hidden rebates to computer manufacturers on the condition that they bought all or the vast majority of their CPUs from Intel. PC makers which took these payments include Acer, Dell, Lenovo and HP.

Competing x86 chipmakers would have had to offer prices for their CPUs at below their manufacturing costs in order to compete with these rebates, the commission found.

Intel also made direct payments to major retailer Media Saturn Holding on the condition that it stock only Intel-powered computers, the commission said.

Additionally, Intel paid computer manufacturers to halt or delay the launch of products containing competing CPUs, and to limit the sales channels available to these products, the Commission said.

“In one case, a computer manufacturer took up only a small part of an offer by AMD of free CPUs because acceptance of all the free CPUs offered would have led that computer manufacturer to breach the conditions of its agreement with Intel and to lose rebates on all its much more numerous Intel purchases,” Kroes said.

Otellini said the Commission had ignored or refused to obtain evidence that contradicts its charges, but added that Intel will work with the Commission to ensure compliance with the decision.

Intel stock on the Nasdaq fell 0.53% to $15.13 (€11.11) following the announcement.

Europe currently accounts for around 30% of the €22 billion x86 CPU industry.