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Charges may be pivotal for Intel

Times Staff Writers

Intel Corp. may have to change the way it conducts business globally if European regulators prove allegations that the company abused its position as the world’s biggest chip maker.

The European Commission on Friday formally accused the Santa Clara, Calif., company of practices that violated antitrust laws, such as offering computer makers improper discounts and rebates to discourage them from buying microprocessors from Intel’s smaller rival, Advanced Micro Devices Inc.

The commission said Intel’s tactics were “part of a single overall anticompetitive strategy” that hurt consumers.

The charges show the European Union’s growing willingness to challenge American multinational companies that it believes compete unfairly. Microsoft Corp. and Apple Inc. are other high-tech companies in the commission’s sights.

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“It’s a big deal because ultimately it may lead to reform,” said David Balto, former policy director at the Federal Trade Commission. “It may stop Intel from doing a whole bunch of practices that have been cutting AMD off at the kneecaps.”

Intel has 10 weeks to file a response with the EU. The company denied the charges in public statements Friday, calling the semiconductor industry “fiercely competitive.”

“Prices of microprocessors continue to go down,” Intel spokesman Chuck Mulloy said. “That’s a sign of the market operating properly.”

Intel supplies 80% of the world’s microprocessors, the brains inside personal computers. Sunnyvale, Calif.-based AMD has long struggled to chip away at Intel’s market share, often complaining to regulators in the U.S. and international markets that Intel was using unfair tactics to maintain its edge.

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AMD persuaded Japanese regulators to rule against Intel in an antitrust case, and South Korean officials are undertaking a similar probe. AMD has civil antitrust claims against Intel pending in federal district court in Delaware and in Japan.

“Intel has been able to freeze AMD out of particular product lines and geographies,” said Chuck Diamond, AMD’s outside antitrust lawyer. “These aren’t rebates but punitive price increases against those who don’t meet the Intel quota.”

Investors reacted mildly, sending Intel shares down 46 cents, or 2%, to $23.54. The news failed to stop AMD’s recent stock slide; its shares fell 86 cents, or 6%, to $13.87.

Edwin Mok, an analyst at investment bank Needham & Co., said the EU’s case was seen by Wall Street as a “slight negative for Intel” because of the expected legal expenses.

The EU’s specific allegations are confidential. In a news release about the case, the commission said Intel violated antitrust laws by providing rebates and below-market prices to hurt AMD and by paying computer makers to cancel or delay products using AMD chips.

The Intel allegations are the latest in a series of steps taken by the EU to stop corporate behavior it believes is anticompetitive. In recent years it has blocked a $42-billion merger between General Electric Co. and Honeywell International Inc. that U.S. officials had conditionally approved and has hit Microsoft with more than $1 billion in fines for antitrust violations. It is now investigating Apple Inc. and record labels over digital music pricing.

With their charges, European regulators could alter Intel’s global practices by threatening huge fines or issuing cease-and-desist orders.

“We Americans are just not used to thinking that what the European Commission does can have a profound effect on us,” said Robert H. Lande, a University of Baltimore law professor and director of the American Antitrust Institute, a consumer-focused think tank in Washington. “But it’s a new world, and it can.”

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F. Scott Kieff, a law professor at Washington University in St. Louis and a research fellow at the Hoover Institution at Stanford University, said the European Commission was unfairly targeting Intel and Apple because they were successful.

“Simply being big isn’t bad,” he said. “In Europe, especially if you’re not a European company, it makes you a prime target.”

michelle.quinn@latimes.com

jim.puzzanghera@latimes.com

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Quinn reported from San Francisco and Puzzanghera from Washington.


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