Brussels Throws Another Punch at Intel

For the past 10 years, U.S. chipmaker Advanced Micro Devices (AMD) has been filing complaints with regulators in the U.S., Europe, and Asia alleging that Intel (INTC) engaged in anticompetitive practices that limit consumer choice. Every time, Intel has responded by painting the charges as nothing more than the gripes of a jealous foe.

But in Europe, it's not just AMD that is complaining. The Brussels-based European Consumers' Organization (BEUC) also has expressed concern that Intel's practices may be limiting the variety of products offered to consumers—and consequently raising the prices buyers pay for personal computers.

The BEUC has the ear of the European Commission, and on July 17 the EC's antitrust unit announced it is expanding an investigation of Intel that probes whether the chipmaker has infringed EC Treaty rules on abuse of a dominant position with the aim of excluding AMD from the market. To prevail, the EC must prove not only that Intel's business practices were illegal but also that they hurt consumers.

Abuse of Power?

The EC has been investigating Intel since 2005 and has twice conducted dawn raids on the company's European offices (BusinessWeek.com, 7/27/07). In its new "statement of objections"—a formal step in EC antitrust proceedings akin to an indictment—the EC said it is investigating whether Intel provided rebates to Germany's MediaMarkt, an electronics retailing unit of the Metro (MEOG) chain, on the condition that it sell only Intel-based PCs.

The EC is also examining whether Intel made payments to induce an unnamed computer manufacturer to delay the planned launch of a product line using an AMD microprocessor. And investigators are probing whether Intel provided substantial rebates to that same computer maker on the condition that it buy all of its laptop microprocessors from Intel.

The EC said in a statement that each of these alleged actions is "considered to constitute an abuse of a dominant position in its own right." It went on to say that it "considers at this stage of its analysis that all the types of conduct reinforce each other and are part of a single overall anticompetitive strategy aimed at excluding AMD or limiting its access to the market." If the charges are found to be true, the EC could order the world's largest chipmaker to alter its behavior or face fines that could total up to 10% of its global revenue.

Intel said in a statement that it is "disappointed" the EC has expanded its investigation, adding that the latest charges "suggest that the Commission supports AMD's position that Intel should be prevented from competing fairly and offering price discounts which have resulted in lower prices for consumers."

To Whose Benefit?

BEUC, the European consumer group, sees it differently. "We are shocked by the reaction of Intel, which is trying to make us believe that its aggressive practices to reduce prices are in consumers' interests," said Monique Goyens, BEUC's director general, in a statement released on July 18. "On the contrary, the main effect of these practices is to drive rivals out of the market in the long term, to the detriment of consumers."

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