EC publishes decision concerning Intel 'abuse of dominant position'
The European Commission stands by its assessment that Intel broke EC treaty antitrust rules by engaging in illegal practices to exclude competitors from the market for x86 CPUs and publishes a non-confidential version of its Intel decision as evidence.
By Suzanne Deffree, Managing Editor, News -- EDN, September 21, 2009
The EC (European Commission) today published a non-confidential version of its Intel Corp antitrust decision, adopted on May 13, together with a summary of the key elements of the decision.
The decision found that Intel broke EC treaty antitrust rules by engaging in two types of illegal practices to exclude competitors including AMD from the market for x86 CPUs. Specifically, the EC concluded that Intel gave wholly or partially hidden rebates to computer manufacturers on the condition that they bought all, or almost all, of their x86 CPUs from the company. Intel also made direct payments to a major retailer on condition it stock only computers with Intel x86 CPUs, the EC added. And second, according to the EC, Intel made direct payments to computer manufacturers to halt or delay the launch of specific products containing competitors’ x86 CPUs and to limit the sales channels available to these products. The EC coins such actions as "naked restrictions."
"By undermining its competitors’ ability to compete on the merits of their products, Intel’s actions undermined competition, reduced consumer choice, and hindered innovation," the EC's statement today reads. "The Commission's decision outlines specific cases of these conditional rebates and naked restrictions, as well as how Intel sought to conceal its practices and how computer manufacturers and Intel itself recognized the growing threat represented by the products of Intel's main competitor, AMD."
The EC publication announcement came today just one day before IDF (Intel Developer Forum) San Francisco is set to officially kick off. Intel has since May argued the decision -- one that came with a record $1.45 billion EC antitrust fine -- saying that the decision is wrong and ignores the reality of a highly competitive MPU marketplace.
The company had not issued an official press statement on today's EC publication as of 11:45am eastern time, but in August a Wall Street Journal report suggested that evidence may have been overlooked in the case, backing Intel's argument somewhat. The newspaper cited a report in which the EU ombudsman, P Nikiforos Diamandouros, claimed the commission committed "maladministration" by not recording in the case file a formal account of an August 2006 meeting between commission investigators and a senior Dell executive questioned in the long-running antitrust case. According to the WSJ, Diamandouros' report stated that the executive is believed to have told investigators that Dell viewed the performance of AMD as "very poor."
In its statement today, the EC did not touch on the WSJ cited Dell conversation. It did, however, claim Intel rebates to Dell from December 2002 to December 2005 were conditioned on Dell purchasing exclusively Intel CPUs. The decision also outlined Intel conditional rebates to HP from November 2002 to May 2005; Intel rebates to NEC from October 2002 to November 2005; Intel rebates to Lenovo during 2007; and Intel payments to Media Saturn Holding (MSH), Europe's largest PC retailer, that were conditioned on MSH selling exclusively Intel-based PCs from October 2002 to December 2007, according to the EC.
The naked restrictions outlined by the EC today include conditional payments to HP, Acer, and Lenovo. In the three restrictions claimed by the EC, the OEMs were encouraged to postpone the launch AMD-based products.
The EC further said that it found "Intel generally sought to conceal the conditions in its arrangements" with the PC manufacturers and MSH.
"The evidence in the decision indicates the growing threat that AMD's products represented to Intel, and that Intel's customers were actively considering switching part of their x86 CPU supplies to AMD," the EC said.
"For example, in an October 2004 e-mail from Dell to Intel, a Dell executive stated that 'AMD is a great threat to our business. Intel is increasingly uncompetitive to AMD which results in Dell being uncompetitive to [Dell competitors]. We have slower, hotter products that cost more across the board in the enterprise with no hope of closing the performance gap for one to two years.' In a submission to the Commission, Dell also stated that as regards Opteron, 'in Dell's perception this CPU generally performed approximately […] better than the comparable Intel Xeon CPU at the time.' As regards AMD's Athlon PC CPU, an internal HP presentation from 2002 stated that it 'had a unique architecture,' was 'more efficient on many tasks,' and had been 'CPU of [the] year [for] three consecutive years,'" the EC said.
AMD this morning was quick to comment on the EC's publication. “This is the first time that Intel has had to confront now publicly available facts of its illegal behavior and it won’t be the last," Tom McCoy, AMD executive VP of legal affairs, said in an e-mail. "The US FTC and New York Attorney General’s continuing investigations and AMD’s civil case against Intel will provide other clear demonstrations of Intel breaking the law, and we remain confident that we will win our US civil case against Intel, which goes to trial in March.”
As McCoy noted, Intel is currently under investigation by the United States Federal Trade Commission and is facing antitrust allegations in New York State.
The full text of the EC decision, as well as its summary, is now available on the Europa Web site.
