Update: Europe taking steps to charge Intel with antitrust law violations

Posted by Wolfgang Gruener

Brussels (Belgium) – The European Commission today issued a Statement of Objections (SO) which outlines the Commission’s preliminary view that Intel has infringed the EC Treaty and “abused” its dominant market position to prevent AMD from competing in the CPU market.

According to the SO, violates Article 82 of the EC Treaty, which is a cornerstone of the antitrust law of the EU. The preliminary view published today states that Intel’s actions were found to infringe against three of the four paragraphs described by the EC Treaty as monopoly abuse.

“First, Intel has provided substantial rebates to various Original Equipment Manufacturers (OEMs) conditional on them obtaining all or the great majority of their CPU requirements from Intel. Secondly, in a number of instances, Intel made payments in order to induce an OEM to either delay or cancel the launch of a product line incorporating an AMD-based CPU. Thirdly, in the context of bids against AMD-based products for strategic customers in the server segment of the market, Intel has offered CPUs on average below cost,” The SO of the EC reads.

In this context of existing EU trade law, the Commission found Intel, at least at this time, to have violated the law in the context of  “directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions”, “limiting production, markets or technical development to the prejudice of consumers”, as well as “applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage.” As a result, Article 82 states that such violations represent an “abuse […] undertakings of a dominant position within the common market [which] shall be prohibited as incompatible with the common market insofar as it may affect trade between Member States.”

The current SO does not yet provide the foundation for charging Intel with antitrust violation, but is considered to be a “preliminary conclusion”.  Intel now has 10 weeks to reply to the document, and will then have the right to be heard in an Oral Hearing. If the preliminary views expressed in the SO are confirmed, the Commission may require Intel to cease the abuse and may impose a fine. However, the “memo” provided by the EC today uses strong language and notes that the organization “considers at this stage of its analysis that the three types of [Intel’s] conduct reinforce each other and are part of a single overall anti-competitive strategy.

 

Update 1:53 PM EST: Intel, AMD release statements in response to the SO of the EC

As expected, AMD is in favor of the announcement:  "Consumers know today that their welfare has been sacrificed in the illegal interest of preserving monopoly profits. Intel has circled the globe with a pattern of conduct, including direct payments, in order to enforce full and partial boycotts of AMD. The EU action obviously suggests that Intel has, once again, been unable to justify its illegal conduct," said Thomas M. McCoy, AMD executive vice president legal affairs and chief administrative officer, in a prepared statement. 

Intel, on the other side wrote in an email attributed to Bruce Sewell, senior vice president and general counsel: “We are confident that the microprocessor market segment is functioning normally and that Intel’s conduct has been lawful, pro-competitive, and beneficial to consumers. While we would certainly have preferred to avoid the cost and inconvenience of establishing that our competitive conduct in Europe has been lawful, the Commission's decision to issue a Statement of Objections means that at last Intel will have the opportunity to hear and respond to the allegations made by our primary competitor. 

The case is based on complaints from a direct competitor rather than customers or consumers.  The Commission has an obligation to investigate those complaints. However, a Statement of Objections contains only preliminary allegations and does not itself amount to a finding that there has been a violation of European Union law.  Intel will now be given the chance to respond directly to the Commission’s concerns as part of the administrative process. The evidence that this industry is fiercely competitive and working is compelling.  When competitors perform and execute the market rewards them.  When they falter and under-perform the market responds accordingly.”