Intel prepares for EU anti-trust case

Intel is preparing to defend some of its business dealings with PC makers at an anti-trust hearing with European regulators and competitors next week. Questions about its dealings with retailers will have to wait for another day.

The meeting will focus on charges made last July by the European Commission accusing the world's biggest chip maker of handing out "substantial rebates" to computer manufacturers if they bought most of their x86 processors from Intel.

The commission also accused the company of paying computer makers for scrapping or delaying the launch of machines fitted with AMD chips, and of selling its chips for server computers at below cost to large customers such as governments and universities.

Intel has argued that it is playing hard but fair in a very competitive industry.

However, these charges may just be the foundation on which the EC intends to build a much bigger case.

Last month, the regulator made surprise visits to Intel's offices in Munich and to the offices of Europe's largest electrical and electronic goods retailers, Media Markt in Germany, Italy, Hungary and Poland. Raids were also made on Dixon's owner DSG International in the UK and on PPR in France.

The EC said it conducted the raids because it suspected Intel and the retailers of violating laws banning restrictive business practices, or of abusing Intel's dominant position in the computer chip market.

Concerns about Intel's relationship with the leading electronics retailers date back several years, but the EC only opened an investigation in 2006 after receiving a complaint from AMD, Intel's only significant rival.

The commission said at that time that it suspected Intel of pressuring Media Markt not to stock PCs fitted with AMD chips. German Media Markt has more than 460 stores across 11 European countries and is a vital distribution channel for the computer industry.

The raids earlier this year shift the focus onto Media Markt and the other big retail groups. "Media Markt is in as much hot water as Intel now," said AMD spokesman Jens Drew.

The commission's latest search for evidence of anti-trust abuse has been interpreted by people close to Intel as a fishing expedition, revealing a weakness in the regulator's efforts to expand the anti-trust case to the retail sector.

Drew, not surprisingly, doesn't see it like that. Just as it did in the anti-trust case against Microsoft, the commission is treading very carefully and building a solid case that it can defend in an inevitable court appeal, he said.

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Indeed, the landmark 2004 anti-trust case against Microsoft started as two separate investigations, which were then merged into one giant case that not only made the software giant pay a record €1.7 billion (£1.3 billion) in fines, but also forced it to change its business practices.

However, next week's hearing will focus purely on Intel's business practices relating to PC manufacturers. And if it remains solely about this, and doesn't expand to include Intel's behaviour in the retail trade, "the worst case is to write a cheque," Intel chief executive Paul Otellini said in Business Week last October.

If the commission finds Intel guilty it can fine the company up to 10 percent of its worldwide sales – roughly $3.2 billion (£1.6 billion).

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