- The Washington Times - Thursday, May 14, 2009

BRUSSELS | Intel Corp. Chief Executive Paul Otellini vowed Wednesday to appeal the $1.45 billion fine the European Commission imposed on the world’s dominant maker of semiconductors, insisting his company did not harm consumers or violate European law.

Intel controls 80 percent of the microchip market and abused that monopoly position by demanding computer manufacturers use its chips exclusively, the European Commission said.

In issuing the record fine, EU Competition Commissioner Neelie Smit Kroes cited Intel’s misuse of its dominant market position and purported predatory pricing that crowded out its Silicon Valley rival, Advanced Micro Devices Inc.

“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,” the EU antitrust chief said.

The European Commission said it had overwhelming e-mail evidence, as well as statements from the affected companies, to make its case, which it presented in a 500-page report.

The report accused Intel of paying Media Saturn Holding to use its chips exclusively in computers the German electronics retailer sold from 2002 to 2007.

“That is how they pushed AMD and other chip manufacturers out of the market,” said Pieter Kalbfleisch, chairman of the Netherlands Competition Authority and a colleague of Ms. Kroes.

“The amount of the fine is a serious warning to all those companies who want to play unfair,” Mr. Kalbfleisch said.

The European Commission told Intel to cease some of its sales practices in Europe, but declined to say what they were. Intel said it was “mystified” but would comply with the “extremely ambiguous” EU order.

“This is really just a matter of competition at work, which is something I think we all want to see, versus something nefarious,” Mr. Otellini said.

Intel accused the European Commission of deliberately overlooking evidence that would have exonerated the Santa Clara, Calif., company. Intel spokesman Chuck Mulloy denied that the company attached any conditions to its discounts.

For years, AMD has accused Intel of intimidating computer makers into striking exclusive deals for the chips they use.

AMD Chief Executive Dirk Meyer hailed Wednesday’s decision, calling it “an important step toward establishing a truly competitive market.”

In the race to produce the fastest microchip, however, AMD has been losing to Intel year after year. When AMD launched its latest Opteron chip in 2003, it was already surpassed by Intel’s Core i7.

Emilio Ghilardi, AMDs chief sales officer, told NOS Dutch Radio that everyone knows AMD can and should do better.

“I doubt better chips will be made by regulations from the European Commission,” Mr. Ghilardi said. “AMD has some 18 percent of the market, and that is not good enough against Intel’s 80 percent. We should be able to do much better.”

In the corridors of Brussels, rumors are circulating that Intel might contemplate financing AMD just as Microsoft helped out rival Apple back in 1997, when it invested $150 million in Steve Jobs’ company.

“Even Intel may be in need of a healthy industry competitor,” said Anthony Smallwood, a spokesman for the European Commission in Washington. “Competition is always good, and if companies cant learn by rules and regulation, they should learn the hard way.”

The fine must be paid into an escrow account within three months, awaiting the outcome of Intel’s appeal.

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