Intel CEO 'strongly disagrees' with 'baffling' $1.44B antitrust fine

Chip maker plans appeal that will 'refute' EC arguments, Otellini says

Intel Corp. said today it intends to appeal the European Commission's $1.44 billion fine for anticompetitive behavior in the chip market, with CEO Paul Otellini arguing that the EC "ignored or disregarded" evidence "refuting" its judgment.

"There were a number of documents from OEMs or between Intel and OEMs that refute what was claimed here," said Otellini during a hastily called teleconference with the news media after the EC's massive fine was announced this morning.

OEMs (original equipment manufacturers) are PC makers that are Intel's primary customers for processors. The EC ruled that Intel paid rebates to OEMs and to Europe's largest IT retailer, Media Markt, in a way that shut out Intel's closest rival, Advanced Micro Devices Inc., which brought the complaint to the European Union. The EC is the executive arm of the 27-member-state European Union.

Although the rebates resulted in a reduction in retail prices, Competition Commissioner Neelie Kroes said that the harm to consumers stems from their not getting the choice of computers that they would have if AMD hadn't been suppressed.

"Intel has harmed millions of EU consumers," Kroes said earlier today, adding that the large fine should "therefore come as no surprise."

Otellini "strongly disagrees" with the EC's ruling.

"There is no evidence of consumer harm or competitor harm," he said. "It's just a matter of competition at work, which is something we all want to see, versus something nefarious."

Otellini disputed one of the EU's key allegations, that Intel paid "conditional" rebates to PC makers that unfairly locked out chip competitors.

The EC "alleged exclusive deals but couldn't find them, so it said we must have hidden [the evidence]," he said. But the EC "got all of the documents that they wanted ... so I'm really baffled."

Otellini declined to release these documents, which include contracts with OEMs, citing a protective order in the U.S. case in Delaware. That order, according to Intel spokesman Chuck Mulloy, was agreed upon by Intel, AMD and the PC makers.

In those contracts, "there is no condition" demanding that OEMs buy exclusively from Intel, Otellini said.

Intel's contracts with customers are "straightforward" and based primarily on volume. "The more you buy, the less you pay," he said.

Otellini, who had only seen a three-page summary of the EC ruling, not the full 500-page document, said Intel plans to abide by the ruling even as it appeals it. The company has no plans to change its business practices.

Otellini pointed out that as far as he knew, no PC makers had joined the AMD complaint, which was raised nearly a decade ago. Thus, it was "absurd" to suggest that PC makers were disgruntled, or that Intel held any monopolistic sway over them.

"In most cases, our customers are larger than Intel. They have more buying power and are incredible negotiators," Otellini said. "So on the face of it, the scenario is absurd."

Despite the ruling, Intel has no plans to change its investment in Europe, Otellini said. Intel employs 6,000 workers in the EU countries, mostly in Ireland, where it has large chip plants.

Otellini took umbrage at Kroes' tone when the fine was announced.

"I saw her remarks and they sounded like a joke. This is not a joking matter," he said.

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Eric Lai

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