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Fine is the largest ever levied for antitrust violations in the EU

Intel is the largest CPU maker in the world and dominates the market in many categories. Allegations were made against Intel in Europe that the company was using its dominant market position to reduce competition and prevent AMD from gaining market share.

has been following the EU investigation into Intel closely. This week allegations against Intel were outlined that claimed the chipmaker offered computer makers discounts and incentives to not use AMD products and to cancel AMD products in development.

The New York Times reports that The European Commission has now ruled against Intel and fined the massive chipmaker $1.45 billion. The fine is the largest ever levied against a company by the Commission and eclipses the fine that Microsoft paid to the EU for anticompetitive practices by about two times.

The EU competition commissioner Neelie Kroes says that the massive fine was justified because Intel has denied consumers a choice for CPUs in products. Kroes told the NYT, "[Intel used] used illegal anticompetitive practices to exclude its only competitor and reduce consumers’ choice — and the whole story is about consumers."

Intel CEO Paul Otellini said the firm would appeal the decision. 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."

AMD's Giuliano Meroni, president of European operations said, "[The decision would] shift the power from an abusive monopolist to computer makers, retailers and above all PC consumers."

Kroes also says that Intel went to great lengths to cover up its anticompetitive actions. Part of the ruling against Intel also forces the company to immediately stop offering computer makers rebates that are part of the reason Intel maintains an 80% market share in Europe.

Intel must change these practices immediately pending appeal though it can ask for an injunction. The $1.45 billion fine has to be paid immediately, but will be placed into an account and held until all of Intel's appeals are exhausted. The appeals process could reportedly last for years.

The amount of the fine levied against Intel is certainly massive, but the NYT says it could have been even larger. The European Commission can levy fines as high as 10% of the company's total revenue. With sales of $37.6 billion in 2008, the fine could have reached nearly $4 billion.

Fines collected by the commission are added to its budget, which is around €130 billion reports the NYT. Kroes said, "Now they [Intel] are the sponsors of the European taxpayers."

The huge fine will also serve as a warning to other companies facing investigation by the commission. Regulators in the EU are some of the strictest enforcers of antitrust law in the world. The NYT reports that the EU is so much tougher on antitrust that U.S. firms often file allegations in Europe rather than in America. Intel is also facing inquiries in the U.S. from the FCC over similar allegations.

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RE: Finally!
By eyebeeemmpawn on 5/13/2009 11:46:01 AM , Rating: -1
Everyone always says that, but forgets they WERE in that position 4-5 years ago.

Huh? Everyone always says that, because everyone is always in that position. When will your success not depend on your ability to execute and innovate in the semiconductor industry?

RE: Finally!
By RyuDeshi on 5/13/2009 3:31:57 PM , Rating: 5
When Intel pays companies to not use them.

RE: Finally!
By foolsgambit11 on 5/13/2009 4:55:35 PM , Rating: 3
When will your success not depend on your ability to execute and innovate in the semiconductor industry?
When you're the victim of anti-competitive practices.

Of course, at heart is that AMD needed to execute perfectly for more than a product cycle. Product purchase choices are based on brand loyalty and trust in a company, as well as superior product. Would you buy a Chinese car, for instance, even if it did crash test as well or better than comparable offerings from Toyota? I'll personally wait until the company has produced several world-class products and I can trust the reliability of the product in the long-term.

In a developed market, you don't come out with a single great product and suddenly sweep up all of the market share. You have to build market share slowly by being consistently great.

That said, I've bought AMD products more often than not since the days of the K6-II (thanks Anandtech for candid reviews for more than a decade!). Partly based on price (I was a poor college student back then) and partly on principle. Nowadays, since I don't game as much, and my computer needs are barely more than web browsing, it's back to price, and AMD is definitely competitive.

"If you look at the last five years, if you look at what major innovations have occurred in computing technology, every single one of them came from AMD. Not a single innovation came from Intel." -- AMD CEO Hector Ruiz in 2007
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