Intel's got some 'splaining to do

The antitrust pressure on Intel just got a whole lot more serious, with formal charges presented by the European Commission on Friday.

Tom Krazit Former Staff writer, CNET News
Tom Krazit writes about the ever-expanding world of Google, as the most prominent company on the Internet defends its search juggernaut while expanding into nearly anything it thinks possible. He has previously written about Apple, the traditional PC industry, and chip companies. E-mail Tom.
Tom Krazit
2 min read

Intel's legal team will be very busy for the next 10 weeks.

That's how long the world's largest chipmaker has to come up with an explanation for business practices that the European Commission has declared "abuse of a dominant market position." The Directorate-General for Competition on Thursday sent Intel a "statement of objections," which sounds like a polite way of doing business but is quite serious.

The EC cited three examples of objectionable conduct after it investigated Intel's practices and the European PC market at the request of AMD. First, it said Intel offers "substantial rebates" in order to get PC companies to use Intel's chips, and not AMD's, in its products. It expanded that charge to include payments allegedly made by Intel to delay or scuttle the launch of AMD-based PCs in Europe. And it also said that Intel has sold server processors below cost in order to hamper AMD's business.

"These three types of conduct are aimed at excluding AMD, Intel's main rival, from the market. Each of them is provisionally considered to constitute an abuse of a dominant position in its own right. However, the Commission also considers at this stage of its analysis that the three types of conduct reinforce each other and are part of a single overall anti-competitive strategy," the EC said in a press release Friday.

Now Intel has to prove that it either didn't do those things, or that the EC is misinterpreting Intel's business practices, said Bruce Sewell, Intel's general counsel and a senior vice president at the company. Intel does provide rebates to customers, but it argues that the rebate program doesn't run afoul of any fair competition laws. The company also thinks that its costs may not have been calculated correctly in this particular assesment.

But the burden is now on Intel to come up with a satisfactory explanation for its behavior. It will be interesting to see if AMD is able to use any decision against Intel in Europe as part of its antitrust case winding its way through a court in the lovely state of Delaware.

It's not clear that AMD would be allowed to present the results of a European decision in a U.S. courtroom, but it will presumably do its best to do so should the EC find against Intel. Intel has already suffered a legal blow in Japan, and if a similar result is found in Europe, it could be hard to prevent a U.S. court or the Department of Justice from taking a very close look at Intel's conduct here.

Intel has 10 weeks to submit a formal response in writing, and then the EC will either agree with Intel and remove the objections, ask for more information, or find against Intel and levy fines and sanctions. Stay tuned.