The World's Gerry Hadden reports on the massive fine imposed by the European Union on California-based computer chip maker, Intel. According the EU, Intel acted illegally to keep competitors out of the European market.
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LISA MULLINS: I'm Lisa Mullins and this is The World. The European Union has levied a record fine against Intel, the California based computer chip maker. The EU says that for years Intel has used illegal business tactics to sideline competitors. The evidence came after regulators conducted surprise inspections of the chip maker's European operations. The World's Gerry Hadden explains just what Intel did and the price it's now paying.
GERRY HADDEN: The fine amounts to nearly $1.5 Billion dollars. EU Competition Commissioner Neelie Kroes says Intel earned it.
NEELIE KROES: Given that Intel has harmed millions and millions of European consumers by deliberately acting to keep competitors out of the market for over five years, the size of the fine should come as no surprise.
HADDEN: The EU says that between 2002 and 2007 Intel used unlawful sales tactics to win contracts over its only real competitor Advanced Micro Devices or AMD also out of California. Kroes says Intel gave rebates to computer manufacturers so that they'd buy Intel processors exclusively and worse.
KROES: The Commission has specific documented examples of Intel paying other manufacturers to, for example, delay the launch of AMD based PC by six months, and to restrict the sales of AMD based products to certain customers.
HADDEN: Intel denies it paid to have the competition's products delayed. Intel lawyers say they will fight the finding and the fine in the European courts. Bruce Sewell is among them.
BRUCE SEWELL: Like every company, Intel competes to win as much business as it can, and every time Intel wins a sale or secures preferential marketing turns, one of our competitors loses out on that sale or marketing relationship. This is the essence of true competition.
HADDEN: But the EU found Intel exceeded the essence of competition. The ruling comes a year after the EU fined Microsoft nearly $800 Million also for anti-competitive practices. The EU ruled that Microsoft was illegally bundling its own media player and Internet browser with its computer operating systems. Microsoft is still fighting the ruling and is liable for even bigger fines if it loses its appeals. These cases might give you the impression that Europe is just picking on America's high tech glory boys, but Philip Marsden with the British Institute for International and Comparative Law says that's not the case. He says European anti-trust law simply has a lower threshold for intervention than does American law. In America, he says prosecutors have been reluctant to take on cases where consumers have not been hurt. In Europe, that's not necessary.
PHILIP MARSDEN: You don't have to line up hundreds of economists to prove absolutely that there's been consumer harm. You don't await until there's consumer harm. You actually want to intervene in the market place to stop these monopolists before harm can actually trickle down to the consumers.
HADDEN: At any rate, consumers in Europe say they have been hurt by Intel's tactics. Some are now poised to file a group action suit against Intel, says Monique Goyens from the European Consumers Organization.
MONIQUE GOYENS: You can speak about millions of consumers who have bought a computer during that period and who have been forced to have less choice on the market, to pay a higher price and to have less innovative products than would have been the case if there had been more competition. So it's millions of consumers.
HADDEN: But she concedes that it will be difficult. First she says they'll have to prove that Intel's practice stymied innovation and that prices would have been lower had there been more competition. Meanwhile, in the U.S., the Obama Administration is signaling that it may soon follow Europe's lead and lower the threshold for investigating anti-trust claims. A Justice Department official announced this week that its Anti-Trust Division will now begin acting before consumers start complaining. For The World, I'm Gerry Hadden.