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Europeans expand antitrust case against Intel

/ Source: The Associated Press

European Union regulators have expanded their antitrust case against Intel Corp., claiming that the world's largest semiconductor maker has deliberately squeezed rival AMD out of the chip market.

The European Commission said Thursday it has added three new charges against Intel, warning that it may order Intel to change its behavior under threat of large fines that can total 10 percent of its global revenue. Intel's 2007 sales were $38 billion.

Intel said the new charges did not reflect any major change to the first group sent in July 2007.

The company said in a statement that its conduct "has always been lawful, pro-competitive and beneficial to consumers." It claimed that the EU seemed to be supporting AMD's view that Intel should stop price discounts that have lowered prices for customers.

"This is still just the EU doing what the EU does — it hasn't changed our posture with respect to Europe," Intel's general counsel, Bruce Sewell, said in an interview with The Associated Press. "This doesn't change our exposure. It's just more of the same."

Advanced Micro Devices Inc.'s vice president of legal affairs, Tom McCoy, said the latest charges reinforce AMD's long-standing allegation that Intel is "robbing consumers of their fundamental right to choose."

"No antitrust laws anywhere in the world permit Intel to pay retailers and computer manufacturers to boycott non-Intel products," McCoy said in a statement.

Intel, based in Santa Clara, Calif., sells more than three-quarters of all microprocessors that run computers using Microsoft Corp.'s Windows operating system. AMD is its only real rival.

The EU regulators accused Intel of giving a major personal computer retailer — Germany's MediaMarkt AG — substantial rebates in return for it selling only Intel-based computers.

It said Intel also paid a manufacturer to delay an AMD range of x86 central processing units, or CPUs, and gave rebates to the same company in return for buying all its laptop CPUs from Intel.

The EU said all Intel's behavior was part of a coordinated strategy to exclude AMD or limit its access to the market. Intel has eight weeks to respond and can seek a hearing to put its defense to European regulators.

Regulators have previously accused Intel of selling chips below average cost to strategic server customers — such as governments and universities — when bidding against AMD-based products.

The EU said below-cost or predatory pricing may be good for shoppers in the short term but ultimately harms them by killing off rivals that would offer more choice and set a faster pace for innovation in the long term.

Officials claimed last year that Intel's abusive behavior started in 2003 — two years after the EU opened an antitrust probe triggered by an AMD complaint — and went on for approximately three years, the Commission said.

That covers a period when AMD managed to take market share from Intel after the 2003 launch of microprocessors that outperformed Intel's chips. Intel fought back successfully in 2006 by rolling out its core microprocessors.

In the EU's view, the problem is pricing, not market share. Under each of the three charges Intel would be breaking antitrust law by unfairly shutting out AMD from the market, the EU said. Together each action reinforced the others to form a "single overall anticompetitive strategy" that damaged the rules of fair play, the commission said.

It says AMD, based in Sunnyvale, Calif., took its complaints to regulators because it had not managed to win in the marketplace. AMD has racked up more than $4 billion in losses over the last six quarters and is cutting 1,600 workers, or 10 percent of its global work force.

The U.S. Federal Trade Commission in June asked both companies to supply information on possible antitrust problems in the microprocessor market.

South Korean regulators fined Intel $25.4 million last month, saying the semiconductor giant had used hefty rebates to persuade Samsung Electronics Co. and other South Korean computer makers not to use AMD-made CPUs.

AMD also has filed a civil lawsuit against Intel in U.S. District Court in Delaware that is scheduled to go to trial in 2010 and could mean billions of dollars in damages if AMD wins.

Intel has repeatedly denied breaking any laws.

Intel shares rose $1.08, or 5.2 percent, to $21.99 in New York. AMD shares rose 24 cents, or 4.7 percent, to $5.30.