EU reveals 'smoking gun' e-mails from Intel antitrust probe

The European Commission shows evidence of rebates and restrictions designed to crush AMD

In an unusual move, the European Commission (EC) unveiled e-mail exchanges between Intel and computer manufacturers that its antitrust officials describe as "smoking gun" evidence from the probe that resulted in the chipmaker being fined just over $1.45 billion in May.

A non-confidential version of the May ruling was made public Monday, less than a week after Intel's formal appeal of the decision was released by the Court of First Instance in Luxembourg. In its appeal, the company accused Europe's top antitrust authority of erring in law, conducting sloppy analysis, and denying it the right to a fair defense.

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"Late last week Lenovo cut a lucrative deal with Intel. As a result of this, we will not be introducing AMD-based products in 2007 for our notebook products," said a Lenovo executive in a December 2006 internal e-mail that the EC released.

Hewlett-Packard told the EC that Intel granted it credits subject to unwritten requirements, including that HP should purchase at least 95 percent of its business desktop system from Intel.

In an e-mail written in July 2002 during the negotiation of the rebate agreement between HP and Intel, an HP executive wrote: "PLEASE DO NOT... communicate to the regions, your team members, or AMD that we are constrained to 5 percent AMD by pursuing the Intel agreement."

The EC found Intel guilty of handing out rebates to PC manufacturers on condition of near or total exclusivity, and of paying PC makers to delay the launch of models equipped with AMD chips.

At the time of the ruling antitrust officials described the e-mail evidence they had gathered as "a smoking gun," but were unable to make the messages public.

The version of its ruling released Monday shows "specific cases of these conditional rebates and naked restrictions, as well as how Intel sought to conceal its practices and how computer manufacturers and Intel itself recognized the growing threat represented by the products of Intel's main competitor, AMD," the EC said in a statement.

The rebates and restrictions amount to an abuse of Intel's dominant position in the x86 CPU market, it said, adding that the chipmaker's behavior "indicates the growing threat that AMD's products represented to Intel, and that Intel's customers were actively considering switching part of their x86 CPU supplies to AMD."

In an October 2004 e-mail from Dell to Intel, a Dell executive said that AMD is "a great threat to our business. Intel is increasingly uncompetitive to AMD which results in Dell being uncompetitive to [Dell competitors]. We have slower, hotter products that cost more across the board in the enterprise with no hope of closing the performance gap for [one to two] years."

It is unusual for the EC to defend one of its antitrust rulings before a formal appeal is heard in Luxembourg. Some observers said that releasing the e-mails was intended to counter the accusations Intel levelled at the EC last week.

Others said the EC was taking advantage of the disruption in Intel's legal team, following the resignation of Bruce Sewell, the company's top antitrust lawyer a week ago. Sewell left to join Apple, leaving behind him outstanding legal disputes on both sides of the Atlantic.

Copyright © 2009 IDG Communications, Inc.