Intel was fined a record €1.06 billion (£950 million) yesterday for illegally seeking to crush its only serious rival, as the European Commission staged its most spectacular assault yet on alleged anti-competitive business practices.

The penalty exceeded the €899 million fine imposed on Microsoft for abusing its dominant market position last year. As with the software company, Intel signalled a long legal battle by announcing an appeal.

Intel was found to have set up a system of generous rebates for the computer makers Acer, Dell, HP, Lenovo and NEC, which bought all, or nearly all, of their x86 chips from the company.

Intel also made direct payments to Media Saturn Holding, owner of the vast MediaMarkt chain of stores, on condition that it stocked only computers made with Intel components.

“The conclusion is quite clear – the European Commission investigation has uncovered serious wrongdoing,” Neelie Kroes, the Competition Commissioner, said.

“The x86 chips are the engine of the car, so to speak, your computer will not work without these chips. Intel held at least 70 per cent of the world-wide market in them.

“Intel has harmed millions of European consumers by deliberately acting to keep competitors out of the market for computer chips for years. Such a serious and sustained violation of the European Union’s antitrust rules cannot be tolerated.”

Paul Otellini, Intel’s president and chief executive, insisted that consumers had not suffered in its battle against Advanced Micro Devices (AMD), its rival, which first brought a complaint to Brussels’ attention in 2000.

“Intel takes strong exception to this decision,” he said. “We believe the decision is wrong and ignores the reality of a highly competitive micro-processor marketplace characterised by constant innovation, improved product performance and lower prices. There has been absolutely zero harm to consumers. Intel will appeal.”

With American regulators yet to take punitive action against either Intel or Microsoft, yesterday’s announcement reinforced the impression of a transatlantic corporate culture clash.

However, Bruce Sewell, Intel’s general counsel, refused to follow the suggestions of some, including Microsoft, that Brussels is picking on American companies. “I do not have any reason to believe that there is an inherent anti-US bias in the EU’s enforcement preferences,” he said.

“In the computer sector, most of the large companies are American and therefore it is not unreasonable that if there are investigations in that sector, those investigations would involve American companies.”

However, he added that Intel believed the evidence that it used rebates to tie manufacturers to its products was weak, with unfair inferences drawn from a small number of documents. “Regulations should not prevent one company, no matter how large that company is, from offering discounts or providing incentives. There is a line of thought developing primarily out of the European antitrust authorities, but also perhaps being picked up by the Japanese and Koreans, that suggest that rebates can be anti-competitive.”

Dirk Meyer, president and chief executive of AMD, described the ruling as “an important step towards establishing a truly competitive market”.

The fine for Intel comes as Christine Varney, one of America’s top antitrust officials, signalled a return to tougher enforcement as the Obama Administration dropped a strict interpretation of antitrust rules that saw regulators shun major action. Mrs Kroes said that this gave her hope that close cooperation with the Federal Trade Commission “could go in a very positive way”.

Fine behaviour

€992m fine in 2007 on five lift manufacturers for operating a cartel in four countries

€899m penalty levied on Microsoft in 2008 for abuse of dominance

€896m fine last year on glassmaker Saint-Gobain for price-fixing

€750m fine imposed in 2007 against ten companies for running a cartel to fix prices for heavy plant used by power utilities

Source: European Commission

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