Intel has lodged an appeal to the European Court of First Instance (CFI) to annul or reduce the $1.4 billion fine imposed by the Commission in May for Intel’s alleged abuse of dominance in the market of x86 central processing units (CPUs). Intel claims that the Commission erred in law in its assessment by not verifying its allegations against Intel, and by providing insufficient proof of wrongdoing. (See our May 2009 briefing for further details.)

Intel further contends that the Commission infringed essential procedural requirements during the administrative procedure, in violation of its rights of defence. Some of the procedural flaws identified in the appeal are reportedly also contained in a report by the European Union’s ombudsman criticising the Commission for “maladministration” by failing to record “potentially exculpatory” evidence from a key witness.  

Antitrust issues

The Commission published the full text of its decision concerning Intel’s abuse of dominance on 21 September, giving further details of the reasoning and making reference to excerpts from emails and other incriminating evidence. It found that Intel held a 70 per cent market share for the supply of CPUs, which gave it a dominant position, and that it had abused that position by attempting to exclude its main rival, AMD, and so stifle competition and innovation in the market. The decision refers to internal Intel documents that note the growing threat of AMD and concern over potential loss of customers.

The illegal exclusionary behaviour took two main forms:

  • Conditional rebates and payments

Intel granted rebates to the major computer manufacturers Dell, HP, NEC and Lenovo, on the condition that they purchased all, or almost all, of their requirements for CPUs from Intel. It also made payments to Media Saturn Holding, Europe’s largest PC retailer, on the condition that it only sold Intel-based computers in its stores. The Commission found that Intel generally tried to conceal these conditional arrangements, suggesting it was conscious that what it was doing was illegal.

  • Restrictions

Intel granted payments to computer manufacturers HP, Acer and Lenovo on the condition that they postponed or cancelled the launch of AMD-based products, and/or restricted the distribution of AMD-based products.  

What next?

This case is likely to drag on for a number of years. The dates of the hearing at the CFI have not yet been set, and the appeal proceedings will take a minimum of one to two years. Once the CFI makes its judgment, both Intel and the Commission could make a further appeal to the European Court of Justice, which would again last a number of years.