Intel Asks European Court to Toss $1.33 Billion Antitrust Fine

Lawyers for the chip maker claim European regulators conducted a faulty investigation into claims that Intel’s business practices harmed rival AMD.

Intel is asking a European court to overturn a $1.33 billion fine by antitrust regulators in 2009, claiming investigators relied on inadequate evidence and erred in their analysis.

Lawyers for Intel and the European Commission (EC)€”the antitrust arm of the European Union (EU)€”were in Luxembourg July 3 arguing before five judges at the General Court over the fine levied by the EC in 2009, when regulators said that rebates given by Intel to systems makers Hewlett-Packard, Dell, NEC and Lenovo illegally harmed smaller rival Advanced Micro Devices and consumers.

The EC issued the fine after an eight-month investigation, and during a time that Intel was being investigated in the United States as well as Europe over its business practices. AMD also was suing Intel. The allegations in the investigations and lawsuit were essentially the same€”that Intel was using rebates and similar financial incentives to convince OEMs to limit their use of AMD processors in their systems.

European antitrust regulators said the financial incentives hurt competition and limited product options for consumers. Intel executives pushed back at investigations on both sides of the Atlantic, saying that while the world€™s largest chip maker competed aggressively against AMD and others, its business practices never violated antitrust or other laws.

According to a report from Reuters, Intel attorney Nicholas Green told the General Court that the EC€™s investigation was faulty, relying on insufficient evidence and the subjective beliefs of Intel€™s customers.

"The quality of evidence relied on by the Commission is profoundly inadequate,€ Green said. €œThe analysis is hopelessly and irretrievably defective. The Commission's case turns on what customers' subjective understanding is."

EC attorney Nicholas Khan argued that the rebates were the key to Intel€™s illegal practices.

"These kinds of rebates can only be intended to tie customers and put competitors in an unfavorable position," Khan said, according to Reuters. Khan added that the wording in some contracts with OEMs illustrated that "Intel carefully camouflaged its anti-competitive practices."

The $1.33 billion fine drew sharp reaction in both Europe and the United States, with some applauding the ruling as a victory for fair competition and others saying it threatened jobs and economic growth.

Intel got a boost to its argument six months after the fine was announced when an EU ombudsman criticized the investigation, accusing investigators of €œmaladministration€ for failing to take notes during an interview with a Dell executive in 2006. Intel executives said the ombudsman€™s report supported their contention that EC€™s investigation was biased and ignored evidence that was favorable to Intel.

The General Court is expected to rule sometime over the next few months.

Intel over the past few years has settled most of the investigations and lawsuits related to issues over its business practices. In November 2009, Intel and AMD settled their legal disputes in a 10-year agreement that included Intel paying AMD $1.25 billion and agreeing to a list of anti-competitive business practices that can€™t be used. Intel executives said that despite the settlement, they were adamant that the company€™s practices were not anti-competitive.

In 2010, Intel settled with the U.S. Federal Trade Commission, again agreeing to a list of restrictions on its business practices and again denying any wrongdoing in the case. In February, Intel and the New York Attorney General€™s Office settled a lawsuit brought by that state, with Intel agreeing to pay $6.5 million to cover some of the costs incurred in the litigation.