Antitrust Case Study

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IP/09/745
Brussels, 13th May 2009

Antitrust: Commission imposes fine of €1.06 bn on
Intel for abuse of dominant position; orders Intel to cease illegal practices
The European Commission has imposed a fine of €1 060 000 000 on Intel
Corporation for violating EC Treaty antitrust rules on the abuse of a dominant market position (Article 82) by engaging in illegal anticompetitive practices to exclude competitors from the market for computer chips called x86 central processing units (CPUs). The Commission has also ordered Intel to cease the illegal practices immediately to the extent that they are still ongoing. Throughout the period October 2002-December 2007, Intel had a dominant position in the worldwide x86 CPU market (at least 70% market share). The Commission found that Intel engaged in two specific forms of illegal practice. First, Intel gave wholly or partially hidden rebates to computer manufacturers on condition that they bought all, or almost all, their x86 CPUs from Intel. Intel also made direct payments to a major retailer on condition it stock only computers with Intel x86 CPUs. Such rebates and payments effectively prevented customers - and ultimately consumers - from choosing alternative products. Second, Intel made direct payments to computer manufacturers to halt or delay the launch of specific products containing competitors’ x86 CPUs and to limit the sales channels available to these products. The Commission found that these practices constituted abuses of Intel’s dominant position on the x86 CPU market that harmed consumers throughout the EEA. By undermining its competitors’ ability to compete on the merits of their products, Intel’s actions undermined competition and innovation. The Commission will actively monitor Intel’s compliance with this decision. The world market for x86 CPUs is currently worth approximately €22 billion (US$ 30 billion) per year, with Europe accounting for approximately 30% of that.
Competition Commissioner Neelie Kroes said: "Intel has harmed millions of
European consumers by deliberately acting to keep competitors out of the market for computer chips for many years. Such a serious and sustained violation of the EU's antitrust rules cannot be tolerated".
The computer manufacturers concerned by Intel's conduct in the Commission’s decision are: Acer, Dell, HP, Lenovo and NEC. The retailer concerned is Media
Saturn Holding, owner of the MediaMarkt chain

Conditional rebates and payments
Intel awarded major computer manufacturers rebates on condition that they purchased all or almost all of their supplies, at least in certain defined segments, from Intel:
- Intel gave rebates to computer manufacturer A from December 2002 to
December 2005 conditional on this manufacturer purchasing exclusively Intel
CPUs
- Intel gave rebates to computer manufacturer B from November 2002 to May
2005 conditional on this manufacturer purchasing no less than 95% of its CPU needs for its business desktop computers from Intel (the remaining 5% that computer manufacturer B could purchase from rival chip maker AMD was then subject to further restrictive conditions set out below)
- Intel gave rebates to computer manufacturer C from October 2002 to November
2005 conditional on this manufacturer purchasing no less than 80% of its CPU needs for its desktop and notebook computers from Intel
- Intel gave rebates to computer manufacturer D in 2007 conditional on this manufacturer purchasing its CPU needs for its notebook computers exclusively from Intel.
Furthermore, Intel made payments to major retailer Media Saturn Holding from
October 2002 to December 2007 on condition that it exclusively sold Intel-based PCs in all countries in which Media Saturn Holding is active.
Certain rebates can lead to lower prices for consumers. However, where a company is in a dominant position on a market, rebates that are conditional on buying less of a rival's products, or
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