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Wednesday, September 16, 2009

Intel Outlines Objections to EC's $1.45 Billion Fine

Intel has outlined its objections to the $1.45 billion fine imposed by the European Commission in a case started by rival Advanced Micro Devices in 2000. Intel's Chuck Mulloy said the EC got the facts and economics wrong. Intel also told the EC that AMD increased its market share and profits during the period in dispute.

Regulatory rules have kicked some sand on an anticompetitive case against Intel dating back to 2000. The European Commission, the executive arm of the European Union, on Monday published a summary of Intel's appeal of the EC's $1.45 billion fine.
Intel officials say they stand by their decision to contest the fine imposed in May. It was the largest ever levied by the EC on a single firm.

The case against Intel began in 2000 when Intel rival Advanced Micro Devices alleged Intel's business practices were anticompetitive. The chipmaker was accused of offering discounts to European computer manufacturers to purchase Intel's processors instead of AMD's. It wasn't until 2007 that the commission decided to fine Intel, and the fine was approved in May.

"We think the decision by the commission was wrong in terms of interpreting the law," said Chuck Mulloy, Intel's director of communications , in a phone interview. "They got the facts wrong; they got the economics wrong."

Proving the Commission Wrong

In the EC's summary, Intel said the commission had not provided evidence to prove Intel was breaking any laws or acting anticompetitive.

First, Intel said, the commission failed to analyze whether Intel's rebate arrangements with customers were implemented in the European community and had immediate, substantial and direct effects within the European community.

Intel also said the commission failed to prove Intel's rebate arrangements were conditional upon consumers buying all x86 CPUs from Intel rather than AMD.

The commission further failed to address evidence showing that during the period of alleged infringement, AMD substantially increased its market share and its profitability and that its lack of success in certain market segments and with certain OEMS was the result of its own shortcomings, according to Intel.

"Prices are falling, capacity is increasing," Mulloy said. "During the period of the case, AMD's prices increased and market share grew," he added. "In fact, during the period in question, AMD's market share grew by fivefold."

Intel's complaints don't end there. Intel also states in its appeal that the commission failed to find a link between conditional customer discounts and the decisions by Intel customers not to buy from AMD.

Finally, Intel contends the commission did not prove the company engaged in a long-term strategy to foreclose competitors.

Lengthy Process

Now that the EC has published its summary, it and Intel will proceed with further steps, which include an ongoing exchange of filings by both Intel and the commission.

"At some point there will be a set of oral arguments before the CFI (Court of First Instance), culminating in a decision anywhere from 18 to 24 months from now," Mulloy said.

The CFI is an independent court attached to the European Court of Justice that hears disputes and appeals relating to trademarks and other issues. CFI is tasked with ensuring that the law is observed in the interpretation and application of the treaties.

Asked whether Intel will come out on top in the end, Mulloy said: "Of course we believe we'll succeed; otherwise, why would we appeal?"

By Patricia Resende

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