EU Court Upholds Massive Fine Against Intel

(CN) - Microchip kingpin Intel owes the EU more than $1.4 billion for abusing its dominant position on the x86 CPU market, the General Court found Thursday.

The ruling upholds the fine imposed by the European Commission in 2009, which had found that Intel used its market heft to shut out competitor Advanced Micro Devices between 2002 and 2007.

During the investigation, the commission pegged Intel's market share at 70 percent, a figure compounded by the company's rebate scheme that rewarded Dell, Lenovo, HP, NEC and European retailer Media-Saturn-Holding for buying and selling only Intel x86 CPUs.

Regulators also found that Intel paid HP, Acer and Lenovo to postpone, cancel or restrict the launch of AMD's CPU products. Faced with a $1.44 billion fine for the two types of market abuse, Intel sought a reversal by the General Court of the European Union.

The Luxembourg-based court instead dismissed Intel's appeal with a nearly 160-page judgment Thursday that calls the company's rebate scheme an "exclusivity rebate."

"Such exclusivity rebates, when applied by an undertaking in a dominant position, are incompatible with the objective of undistorted competition within the common market, because they are not based - save in exceptional circumstances - on an economic transaction which justifies this burden or benefit but are designed to remove or restrict the purchaser's freedom to choose his sources of supply and to deny other producers access to the market," the court wrote.

And under settled case-law, Intel's lack of an objective justification for the rebate scheme necessarily meant an antitrust violation, according to the ruling.

"The capability of tying customers to the undertaking in a dominant position is inherent in exclusivity rebates," the court wrote. "The grant by an undertaking in a dominant position of a rebate in consideration of a customer's obtaining all or most of its requirements implies that the undertaking in a dominant position grants a financial advantage designed to prevent customers from obtaining their supplies from competing producers. It is therefore not necessary to examine the circumstances of the case in order to determine whether that rebate is designed to prevent customers from obtaining their supplies from competitors."

Intel's deals made it impossible for AMD to compete since the smaller company would have had to pay off manufacturers and retailers for the loss of the rebates - although regulators did not have to prove this actually happened to make the antitrust case stick, the court said.

"Even in the context of an analysis of the circumstances of the case, the commission must only show that a practice is capable of restricting competition," the decision states, citing case-law. "The mechanism of an exclusivity rebate granted by an undertaking in a dominant position which is an unavoidable trading partner enables it to use the noncontestable share of the demand of the customer as leverage to secure also the contestable share. When such a trading instrument exists, it is unnecessary to undertake an analysis of the actual effects of the rebates on competition."

As for Intel's payments to retailer Media-Saturn, they were identical to the rebates given to computer manufacturers - only "further down the supply chain," the court held.

Similarly, by paying off HP, Acer and Lenovo to delay or cancel products with AMD processors, Intel pursued the singular anticompetitive objective of shutting AMD out of the market, according to the court's opinion.

The court rejected Intel's argument that the commission lacked authority under international law to punish antitrust infringements. Intel never raised the issue of jurisdiction before, and regulators showed a sufficient effect on trade between member states to prove their case, the court said.

EU commissioners welcomed the court's decision, while Intel spokeswoman Sophie Jacobs called the judgment "disappointing."

"It's a complex case which is reflected in the decision," Jacobs said. "We will begin evaluating the decision."

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