Update: Intel accused of breaching European antitrust rules

The European Commission has accused Intel of abusing its dominant position in the microprocessor market to the detriment of rival Advanced Micro Devices.

The Commission sent Intel a formal accusation of antitrust violations, known as a statement of objections, on Thursday, and has given the company 10 weeks to reply, the Commission said Friday.

Intel abused its position in three ways, according to the Commission: by offering rebates to PC makers who agree to buy the majority of their processors from Intel; by making payments to some manufacturers to encourage them to delay or cancel products using AMD processors, and by selling processors below cost when bidding against AMD for contracts with server makers.

"The Commission has been looking extremely rigorously at the effects of Intel's practices since 2000, in particular the policy of granting rebates in such a quantity that an efficient competitor would be forced to price (its chips) at below cost," Commission spokesman Ton Van Lierop said at a press conference Friday.

The Commission determined that Intel's behavior had been "bad news for consumers and computer makers," he said.

Intel disagreed, arguing that the microprocessor market is functioning "normally" and that its actions in Europe, far from harming competition, have been beneficial for consumers. "The evidence that this industry is fiercely competitive and working is compelling. When competitors perform and execute the market rewards them. When they falter and under-perform the market responds accordingly," it said, in a swipe at AMD.

It said it regretted the cost of the pending litigation but that it would be happy to respond to the allegations from its "primary competitor."

AMD greeted the news with enthusiasm, calling it "a moment of truth for the entire IT industry." The Commission's action will open the global microprocessor market for the benefit of both consumers and PC companies, Giuliano Meroni, AMD's president for Europe, the Middle East and Africa, said in a statement.

After Intel replies to the charges, it can request an oral hearing. If the Commission remains convinced that Intel has abused its market position, it can fine the company up to 10 percent of its global annual sales and order it to stop the anticompetitive behavior.

There is no deadline for the Commission to reach a final decision.

AMD has already filed antitrust complaints against Intel in several parts of the world, including Europe, the U.S. and Japan. Its complaints echo the charges levelled by European regulators today: that Intel used its market power to illegally coerce PC makers into not using its rivals' products.

Intel has previously settled antitrust charges in the U.S., although those charges were different in nature. The U.S. Federal Trade Commission filed suit against Intel in 1998, accusing it of using its market dominance to coerce trade secrets from customers. Intel settled that case the following year. It agreed to refrain from certain practices but denied any wrongdoing.

(Additional reporting by James Niccolai in Paris.)