Intel-McAfee Deal Raises EC Concerns: Reports

European antitrust regulators reportedly are taking a close look at Intel's $7.68 billion bid to buy security software vendor McAfee.

Intel's proposed $7.68 billion acquisition of security software vendor McAfee could put the giant chip maker back in the cross hairs of European antitrust regulators.

According to a report in the Wall Street Journal, members of the European Commission-the European Union's antitrust arm-are concerned that Intel's plans to use the McAfee acquisition to put greater security capabilities into its chips will unfairly make it difficult for McAfee's rivals to compete. Intel owns more than 80 percent of the global chip market, making it an important partner of other security software vendors outside of McAfee.

Quoting unnamed sources, the WSJ said the key issue is whether these McAfee-based security functions that will be embedded into the Intel hardware will be designed so that they only will work-or will work best-with McAfee products, at the expense of other security software.

The concern echoes a claim that the Federal Trade Commission made late last year when it sued Intel for what commissioners said were unfair business practices. One of the claims was that Intel had altered some of its technologies, such as compilers, in such a way that limited the performance of chips from rival Advanced Micro Devices. That lawsuit was settled in August.

In its article, the WSJ said that the EU was worried that "if McAfee, by virtue of being owned by Intel, had privileged access to those features, it could be difficult for McAfee's rivals to compete."

Such concerns could translate into a lengthy review period by the European Commission, according to the newspaper.

The EC reportedly has sent questionnaires to Intel officials asking about their plans for McAfee's technology, and also has been talking with other security software vendors about Intel's proposal to buy McAfee.

Intel officials have been vocal about their plans to make PCs more secure by improving the security capabilities of the processors. At the Intel Developer Forum in September, Renee James, senior vice president and general manager of Intel's Software and Services Group, said the McAfee acquisition could help Intel improve security in such areas as anti-theft protection.

In addition, President and CEO Paul Otellini, during his keynote address at the show, said the combination of Intel's vPro security software and McAfee's technology could help Intel in many ways, including moving from a reactive posture to a more proactive one in terms of PC security.

"Only the combination of hardware and software ... can yield this kind of innovation, and that's the reason for buying McAfee," Otellini said.

In a statement Dec. 16, McAfee officials said that they have filed all the necessary pre-close regulatory paperwork, which is now being reviewed by various agencies around the world. The company expects the deal to close in the first half of 2011.

Intel is no stranger to the European Union or its concerns over antitrust issues. The EC last year hit Intel with a record $1.45 billion fine for what regulators said was anticompetitive behavior designed to marginalize AMD in the European market. After some eight years of investigation, they found that Intel used its market dominance to unfairly influence systems makers to limit their use of AMD products in their computers, something the EC said hurt European consumers.

Those claims echoed others made by the FTC, the N.Y. State Attorney General's Office and AMD in lawsuits filed against Intel. Along with the FTC case, Intel and AMD have settled their legal issues, and Intel and Nvidia have appeared to do the same.

Throughout all these legal disputes, Intel officials have said that while they compete aggressively in the market, their business practices have not been illegal or anticompetitive.