EU plans to penalise Intel for abusing dominant market position

According to a newspaper report, EU competition commissioner Neelie Kroes has decided to penalise Intel for abusing its dominant market position. The Financial Times Deutschland reports that Intel will in future no longer be able to market its chips with discounts for PC manufacturers. The company will also be unable to subsidise retailers' advertising costs where it demands exclusivity. In addition, according to the FTD, Intel is threatened with a fine of up to 10 per cent of annual sales, which the FTD calculates as €2.6bn at current exchange rates. The final decision should be published in late summer.

The EU Commission has been interested in Intel's use of its market position for at least seven years and launched a competition suit in July 2007. The cartel monitoring body's interest was apparently stoked by interventions from Intel competitor AMD, which is also pursuing actions against Intel in the US. According to the FTD, the EU sees the more or less complete withdrawal of companies such as IBM, Cyrix and Transmeta from production of Intel-compatible chips some years ago as an indication of uncompetitive practices.

Intel is alleged to have paid OEM manufacturers to delay or cancel the launch of products containing AMD chips. In addition, Intel is accused of supplying products to strategically important customers at below cost. Deals are also reported to have been signed with retailers such as Media Markt-Saturn. According to the FTD, Media-Saturn-Holding could also be penalised. The German electronics retailer first linked up with Intel back in 1999. The newspaper cites inside sources in stating that in 2007 alone, the company received a payment in the tens of millions. It remains unclear what punishment is likely to be handed down to Media-Saturn.

According to the FTD, Hannes Schwaderer, Intel's head in Germany, has rejected the accusations. He claims that Intel has acted properly, fairly and within legal boundaries. Whilst the company has admitted, in a legal case at the District Court in Delaware, that it has a contractual relationship with Media-Saturn-Holding, its German subsidiary denies that the contract stipulates exclusivity.

(trk)