EU probes Intel's marketing practices

The European Commission is examining Intel's general business practices and the way it licenses the design of the "bus" connections that link chips with other computer components, Intel says.

Feb. 7, 2002 1:06 a.m. PT

3 min read

BRUSSELS, Belgium--Giant chipmaker Intel faces a European antitrust investigation into complaints that its marketing practices discriminate against rivals, the European Commission said.

The commission is examining Intel's general business practices and the way it licenses the design of the "bus" connections that link chips with other computer components, Intel spokesman Chuck Mulloy said. Europe generated a quarter of Intel's $34 billion in sales in 2000.

Two unidentified competitors have charged Intel with "abusive" marketing tactics, the commission said. It said the probe is "at a very early stage" and has not uncovered evidence that Intel broke European laws. Intel would face a fine as high as 10 percent of sales if found guilty.

Intel joins Microsoft as a target of European antitrust enforcers at the same time as the slowing economy cuts demand for hardware and software. Global semiconductor sales growth declined for the sixth month in February, the Semiconductor Industry Association said Tuesday.

Intel shares have fallen 61 percent in the past 12 months, compared to the 65 percent drop of the Standard & Poor's semiconductors index. The Standard & Poor's 500 index has declined 23 percent over the same period.

A widening Microsoft investigation?
Competition Commissioner Mario Monti said last week that the commission, the 15-nation European Union's executive agency, may broaden an investigation into Microsoft for possible abuse of its dominant market position. There is no link between the Microsoft and Intel cases, the commission said.

The commission said last August that the software maker has used its dominance in the PC market to force computer networks to choose its server software instead of products made by rivals such as Sun Microsystems.

The commission is separately investigating Microsoft's latest operating system, Windows 2000, and may soon issue formal charges against the company in that case or combine it with the server case.

The Intel probe was reported earlier today by The Wall Street Journal. The newspaper said the commission is concerned that advertising methods such as the "Intel Inside" marketing subsidies may discriminate against rivals, citing lawyers close to the case.

"We have received a request for information from the European Commission," Mulloy said. "We have been cooperating with the commission on its request. We believe our business practices are fair and lawful."

Intel last year had an estimated share of more than 80 percent of the microprocessor market, measured by units sold, the newspaper reported. Its next largest competitor is Advanced Micro Devices.

Intel's ad subsidies
Intel helps pay for PC makers' advertisements as long as they carry the Intel logo or play its familiar four-note jingle. The program works with 1,500 PC makers worldwide and 800 in Europe, according to a document from Intel.

About $4 billion in advertising has carried the logo. Although the company also runs its own advertisements--the first Intel television ad ran in London in November 1991--most of the marketing is done by displaying its logo or on PC makers' ads.

"There is nothing wrong with loyalty rebates if they're granted by a company not in dominant position," commission spokeswoman Amelia Torres said. "Intel is in a dominant position, so it must make sure that what it's doing is not intended to run smaller companies out of business."

She said the complaints came from non-European companies.

Via Technologies, Taiwan's biggest computer chip designer and a supplier of all the largest PC companies except No. 1 Dell Computer, has provided information to the commission about the antitrust inquiry, spokeswoman Manuela Mercandelli said.

The Intel investigation comes after the U.S. Federal Trade Commission closed a case against the company last September after a three-year probe. The FTC in 1997 began investigating whether Intel used its dominance in the market for computer chips to control markets for other electronic components of personal computers.

Among other practices, the FTC investigated whether Intel withheld access to its chip technology to prevent rivals from producing compatible products. The FTC didn't say why it dropped the case.