European Commission Initiates Proceeding Against Intel Alleging Anticompetitive Behavior

July 27, 2007. The European Commission (EC) announced in a release that it has "has sent a Statement of Objections (SO) to Intel on 26th July 2007. The SO outlines the Commission's preliminary view that Intel has infringed the EC Treaty rules on abuse of a dominant position (Article 82) with the aim of excluding its main rival, AMD, from the x86 Computer Processing Units (CPU) market."

The EC asserted in its release that "Intel has engaged in three types of abuse of a dominant market position. First, Intel has provided substantial rebates to various Original Equipment Manufacturers (OEMs) conditional on them obtaining all or the great majority of their CPU requirements from Intel."

"Secondly, in a number of instances, Intel made payments in order to induce an OEM to either delay or cancel the launch of a product line incorporating an AMD-based CPU."

"Thirdly, in the context of bids against AMD-based products for strategic customers in the server segment of the market, Intel has offered CPUs on average below cost", wrote the EC.

It added that "These three types of conduct are aimed at excluding AMD, Intel's main rival, from the market."

AMD complained to the EC, and is now the primary beneficiary of the EC's action. AMD's EVP for Legal Affairs, Thomas McCoy, stated in a release that "Consumers know today that their welfare has been sacrificed in the illegal interest of preserving monopoly profits. Intel has circled the globe with a pattern of conduct, including direct payments, in order to enforce full and partial boycotts of AMD. The EU action obviously suggests that Intel has, once again, been unable to justify its illegal conduct".

AMD added the Japan Fair Trade Commission (JFTC) took legal action against Intel in 2005, and that Korea is currently investigating Intel.

See also, story titled "Intel Accepts Recommendation of Japanese FTC Regarding Anticompetitive Marketing Practices" in TLJ Daily E-Mail Alert No. 1,107, April 1, 2007.

Intel's General Counsel, Bruce Sewell, responded in a release that "The case is based on complaints from a direct competitor rather than customers or consumers."

"We are confident that the microprocessor market segment is functioning normally and that Intel's conduct has been lawful, pro-competitive, and beneficial to consumers", said Sewell. "The evidence that this industry is fiercely competitive and working is compelling. When competitors perform and execute the market rewards them. When they falter and under-perform the market responds accordingly."

The EC also elaborated on its procedures. "A Statement of Objections is a formal step in Commission antitrust investigations in which the Commission informs the parties concerned in writing of the objections raised against them. The addressee of a Statement of Objections can reply in writing to the Statement of Objections, setting out all facts known to it which are relevant to its defence against the objections raised by the Commission. The party may also request an oral hearing to present its comments on the case."

Intel added that the EC's SO "contains only preliminary allegations and does not itself amount to a finding that there has been a violation of European Union law. Intel will now be given the chance to respond directly to the Commission's concerns as part of the administrative process."

The U.S. Department of Justice's (DOJ) Antitrust Division has not brought a parallel or related action against Intel. Moreover, the EC's competition related actions sometimes lack the basis in rigorous economic analysis, and a finding of harm to consumers, that usually but not always characterize actions by the U.S. DOJ or Federal Trade Commission (FTC).

The EC stands to collect substantial fines from Intel.