Intel faces anti-trust action

The European Commission has confirmed it has sent a statement of objections (SO) to international microchip manufacturer Intel.

In a statement, the commission says the SO outlines its preliminary view that Intel has infringed EC Treaty rules on abuse of a dominant position. The aim of these actions was to exclude main rival AMD from the x86 computer processing unit (CPU) market.

In response, Intel's senior VP and general counsel Bruce Sewell says the company is confident it has acted lawfully.

The commission's preliminary conclusion outlined in the SO finds Intel has engaged in three types of abuse of a dominant market position:

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

These three types of conduct are aimed at excluding AMD, Intel's main rival, from the market, says the commission. At this stage, it considers the three types of conduct reinforce each other and are part of a single overall anti-competitive strategy.

Meanwhile, AMD is adding to the commission's statements, revealing the SO is based on evidence collected in a "thorough, multi-year investigation" of Intel's business practices.

It adds that evidence seized from Intel offices and collected from PC manufacturers across Europe provided the foundation for the European Commission's "strong" anti-trust case.

AMD's executive VP of legal affairs and the company's chief administrative officer Thomas M McCoy says this is not the first time Intel has engaged in anti-competitive behaviour.

"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," he says.

According to the company, Japan's Fair Trade Commission in 2005 ruled that Intel violated the country's anti-monopoly laws by illegally forcing full or partial exclusivity with five Japanese PC makers.

An active anti-trust investigation - with data seizures similar to those in Japan and Europe - continues in South Korea, and the organisation has brought anti-trust civil actions in Japan and the US, says AMD.

Allegations of Intel misconduct are also echoed in a US class-action complaint filed by Dell shareholders earlier this year, which claims Intel illegally paid Dell in excess of a $1 billion a year to not purchase microprocessors from its competitors.

Intel's Sewell notes the case is based on complaints from a direct competitor rather than customers or consumers. An SO contains only preliminary allegations and does not itself amount to a finding that there has been a violation of European Union law, he points out.

"We are confident the microprocessor market segment is functioning normally and that Intel's conduct has been lawful, pro-competitive and beneficial to consumers. While we would certainly have preferred to avoid the cost and inconvenience of establishing that our competitive conduct in Europe has been lawful, the commission's decision to issue a SO means that at last Intel will have the opportunity to hear and respond to the allegations made by our primary competitor," says Sewell.

Intel has 10 weeks to reply to the SO, and will then have the right to be heard in an oral hearing. If the preliminary views expressed in the SO are confirmed, the commission will require Intel to cease the abuse and may impose a fine.