The European General Court in Luxembourg, which is Europe’s top appeal court, and the one just below the final level of the European Court of Justice which is equivalent to the US Supreme Court, handed down a judgment today confirming that the giant US based chip maker Intel Corp must pay a fine of about US$1.4 billion (Euros 1.06 billion) for violations of European anti-trust legislation.
The ruling brings close to final resolution to a case that dates all the way back to 2009 and covers the period between 2002 and 2007, when Intel was accused of giving PC makers secret rebates to stay away from its competitor Advanced Micro Devices, or AMD’s, competing micro-processor products.
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Intel had been quietly paying off PC makers such as Dell, Hewlett-Packard Co, NEC and Lenovo so they would continue to purchase the lion’s share of their microprocessor chips from Intel.
The EU competition authority had also accused Intel of paying the German retail chain Media Saturn Holding to put only computers with Intel chips in its stores.
This ruling by the European Union is just the latest, and by far the most expensive, in a series of cases worldwide that have cost Intel both treasure and, more importantly perhaps, reputation. In South Korea Intel was only fined about U$25 million. In the United States, US Fair Trade Commission actually settled its case with the company without imposing financial penalties at all. Intel did pay AMD US$1.25 billion in 2009 though, in order to end all civil litigation between them.
As a result of all the litigation Intel also long ago agreed to make major changes in its sales practices, so that in a way today the company is being hit very hard for the sins of its past.
When the litigation was first brought Intel held a 70% market share of the microprocessor market in the European Union. Today it is still the biggest player in what remains an enormous US$40 billion global microprocessor business, just for PCs themselves.
Intel has, however, been losing a lot of ground lately in the market for mobile chips, with English company ARM dominating with products for companies like Apple with its iPhone, and for Android phone makers such as Samsung.
The European General Court calculated the fine as an estimated 4.15% of Intel’s annual revenue. This is actually much less the maximum 10% fine that it could have levied.
While Intel had tried to argue in court that the size of the fine was too much, clearly the judges were not being sympathetic. In response one said, “The General Court considers that none of the arguments raised by Intel supports the conclusion that the fine imposed is disproportionate. On the contrary, it must be considered that that fine is appropriate in the light of the facts of the case.”
While Intel can now still appeal to the European Court of Justice itself, so far today it has made no comment on the latest judgment, and may even try to put it behind it.
It is even a little ironic that these days the toughest anti-trust actions are being taken by European courts rather than in the United States itself. That is something Google is also discovering, too, as it tries to grapple with a European court’s recent privacy ruling that is forcing them to find a way to take down personal web search results, where these are “no longer relevant” and in response to individual requests.