BRUSSELS Chipmaker Intel Corp (INTC.O) will fight European Commission charges that it abused its dominance and gave illegal rebates to drive a smaller competitor from the market at a two-day closed hearing next week.
Intel has its logo on four-fifths of the central processing units that run the world's 1 billion personal computers and servers, the rest made by U.S. rival Advanced Micro Devices Inc
Intel and other parties in the case will tell their side of the story on Tuesday and Wednesday to a hearing officer. She will make no decision but report to the top antitrust official in the European Union, Competition Commissioner Neelie Kroes.
The Commission, executive arm of the EU, says Intel tried illegally to persuade computer makers to shun AMD in favor of its own chips by using rebates as a carrot -- and a stick.
It could fine Intel, though any penalty would be unlikely to approach a cap of 10 percent of annual turnover, and possibly damage the firm's reputation by labeling it an unfair competitor.
The Intel case is often compared with the Commission's fight against Microsoft (MSFT.O), which the EU executive fined 899 million euros ($1.39 billion) late last month for failing to comply with antitrust sanctions.
But a competition lawyer in London said the two were very different. The Microsoft case focused on the tying together of products and the withholding of information needed for its competitors' offerings to work with those of the software giant.
"This is a more conservative case than Microsoft. Intel fits more into the traditional pattern of the kinds of abuses the Commission goes after," said Ted Henneberry of Heller Ehrman.
He said that according to public information, the Intel case focused on rebate abuse by a dominant player.
"You can use rebates that in effect would make it almost economically prohibitive to deal with a competitor. Some of the discounts and rebates that the Commission targets they believe have that effect," he said.
The Commission in mid-2007 publicly alleged three kinds of violations by Intel.
First, it said the chipmaker gave computer manufacturers rebates on condition they agreed to obtain most or all of their CPUs from Intel.
Second, it said Intel made payments "to induce (computer makers) to either delay or cancel the launch" of products using AMD chips.
And finally, the Commission said Intel provided CPU chips to strategic customers such as governments and educational institutions at below cost.
Intel has said repeatedly that it did nothing wrong.
Recently BEUC, the pan-European consumers group, joined the case as a third party to represent the interests of consumers in 41 groups spread across 29 countries.
"We think the outcome of this case is very important from a consumer perspective," said Monique Goyens, director-general of BEUC. Having one overly dominant company can lead to less choice and high prices, she said.
Some organizations belonging to BEUC may follow with private lawsuits to seek restitution for customers if the Commission decides against Intel, she said.
The European Commission intensified its focus on Intel last month, raiding the company's Munich offices. It also raided several retailers such as Metro (MEOG.DE) unit Media Markt, which sells computers with Intel chips but not those of AMD.
The Commission is investigating a number of other U.S. technology companies that do a large part of their business in Europe, including mobile telecoms firm Qualcomm (QCOM.O) and Rambus (RMBS.O), a designer of computer memory chips.
(Editing by Dale Hudson)