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EU hits Intel Corp with record fine for illegal sales tactics

THE European Union fined Intel Corp a record 1.06 billion euros (US$1.45 billion) yesterday, saying the world's biggest computer chip maker used illegal sales tactics to shut out smaller rival Advanced Micro Devices Inc.

The fine exceeded a 899 million euro monopoly abuse penalty for Microsoft Corp last year. Intel called the decision "wrong" and said it would appeal.

Intel, based in Santa Clara, California, in the United States, has about 80 percent of the world's personal computer microprocessor market - and faces just one real rival, AMD.

The European Commission says Intel broke EU competition law by exploiting its dominant position with a deliberate strategy to keep AMD out of the market that limited customer choice.

It said Intel gave rebates to computer manufacturers Acer, Dell, HP, Lenovo and NEC for buying all or almost all their x86 computer processing units, or CPUs, from Intel and paid them to stop or delay the launch of computers based on AMD chips.

Intel president and CEO Paul Otellini said the company would appeal to the EU courts because "the decision is wrong" and "there has been absolutely zero harm to consumers." The company promised to comply with the EU order but criticized it as extremely ambiguous.

AMD's Europe president Giuliano Meroni said the EU order "will shift the power from an abusive monopolist to computer makers, retailers and above all PC consumers."

Regulators said Intel also paid Germany's biggest electronics retailer, Media Saturn Holding - which owns the MediaMarkt superstores - from 2002 to 2007 to stock only Intel-based computers.

This meant workers at AMD's biggest European plant in Dresden, Germany, could not buy AMD-based personal computers at their city's main PC store.

"Intel has harmed millions of European consumers by deliberately acting to keep competitors out of the market for computer chips for many years," said EU Competition Commissioner Neelie Kroes. "Such a serious and sustained violation of the EU's antitrust rules cannot be tolerated."

Kroes joked that Intel would now have to change its latest global ad campaign - "sponsors of tomorrow" - to proclaiming "the sponsor of the European taxpayer."

"I can give my vision of tomorrow for Intel here and now: Abide by the law," she added.

EU regulators said they calculated Intel's fine on the value of its European chip sales over the five years and three months that it broke the law. Europeans buy some 30 percent of the 22 billion euros of computer chips sold every year.

Intel's rebates were so large that only a rival that sold chips for less than they cost to make would have had any chance of grabbing customers, the EU executive said.

The European Commission said Intel tried to conceal the conditions attached to these payments and details only emerged from e-mails that regulators seized in surprise raids on the companies.



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