(CN) – The Brussels-based European Commission fined Intel Corp., the world’s largest computer chip manufacturer, a record 1.06 billion ($1.45 billion) on Wednesday for using its market strength to shut out a rival.
The European Commission says that Intel, based in Santa Clara, California, gave rebates to manufacturers Dell, HP, Acer, Lenovo, and NEC for buying Intel’s x86 computer processing units, and also paid the purchasers to stop using chips manufactured by competitor Advanced Micro Devices Inc.
Intel allegedly started offering rebates in 2002 and did so until 2005, according to complaints against the company.
The Commission is accusing Intel of using its dominance, as the holder of 80 percent of the world market for personal computer chips, to shut out AMD, its only major rival.
AMD is also a California company, based in Sunnyvale. Its biggest European plant is located in Dresden, Germany. Intel is accused by regulators of paying Germany’s largest electronics retailer, Media Saturn Holding, to stock only Intel computers, thus preventing AMD workers themselves from buying AMD computers at the main PC store in Dresden.
The Commission says the 1.06 billion fine is based on the value of Intel’s European chip sales over the period of five years and three months that it engaged in illegal sales tactics. European consumers buy about 30 percent of the $30 billion in chips sold annually around the world.
Under Europe’s antitrust laws, the Union could have fined Intel a much higher amount based on Intel’s annual global turnover during the period of the illegal sales tactics. Intel’s annual sales in 2007 amounted to $38.8 billion.
AMD offered a million free chips to one manufacturer in the hopes of gaining business but the manufacturer declined due to fear of losing its rebate on several millions chips from Intel.
Intel paid manufacturers in 2003 and again in 2006 to delay the introduction of AMD notebook computers, costing AMD substantial losses during those Christmas seasons.
Despite Intel’s attempts to conceal their illegal practices, regulators gained insight from e-mails seized during surprise raids of the company.
According to news coverage of the decision by the Associated Press and others, Intel president and CEO Paul Otellini says the company plans to appeal because “the decision is wrong.” He also says that he does not believe that consumers have suffered any harm.