Intel Slammed with $1.45 Billion Antitrust Fine

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BRUSSELS (Reuters) – The European Commission fined Intel Corp a record 1.06 billion euros ($1.45 billion) on Wednesday and ordered it to halt illegal rebates and other practices used to squeeze out rival AMD.

“Given that Intel has harmed millions of European consumers by deliberately acting to keep competitors out of the market for over five years, the size of the fine should come as no surprise,” European Union Competition Commissioner Neelie Kroes told a news briefing.

The EU executive said Intel paid computer makers to postpone or cancel plans to launch products that used AMD chips, paid illegal, secret rebates so computer makers would use mostly or entirely Intel chips, and paid a major retailer to stock only computers with its chips.

It ordered Intel “cease the illegal practices immediately to the extent that they are still ongoing.”

Intel may continue to offer rebates, so long as they are legal, the Commission said.

The EU antitrust fine is the biggest imposed on an individual company, exceeding an 896-million euro penalty last year against glass maker Saint-Gobain for price fixing, and a 497-million euro fine in 2004 on Microsoft for abuse of dominance.

Intel President and CEO Paul Otellini said the company plans to appeal at Europe’s Court of First Instance:

“Intel takes exception to this decision. We believe the decision is wrong and ignores the reality of a highly competitive microprocessor market,” he said in a statement.

The market had little reaction to the news. Frankfurt-listed shares of Intel rose 0.21 percent by 5:57 a.m. EDT.

“It means nothing strategically. It is only a financial fine, not changing the way Intel is operating today,” Jyske Bank analyst Robert Jakobsen said.

The Commission investigated practices dating back to 2002, and said Europe accounted for 30 percent of Intel’s current worldwide 22 billion euro market.

The Commission said Intel must pay the fine, which represents 4.15 percent of the company’s 2008 turnover, within three months of the date of the notification of the decision.

Intel, whose microprocessors power eight out of every 10 PCs in the world, posted first quarter sales of $7.1 billion. Analysts estimated the company enjoys a sizeable cash balance, generating close to $10 billion in cash last year.

The Commission, tasked with ensuring companies do not abuse any market dominance or make deals that restrict competition in the 27-country European Union, started its investigation into Intel in 2001 after a complaint by Advanced Micro Devices.

AMD has also filed a U.S. lawsuit against Intel, which is set to be heard in court in 2010.