EU fine to chip one billion Euros off Intel as Barrett steps down

Chip giant Intel gets hefty fine from the EC, and loses legendary chairman Craig Barrett, to boot.

Last Updated: 31 Aug 2010

The €1.06bn ($1.45bn) anti-competition fine is the largest such charge ever levied by the European Competition Commission, just topping the previous record set by Microsoft of around $1.36bn. But then the world’s largest maker of microprocessors could hardly expect to get away with a slap on the wrist, could it?

And since the Commission can fine firms up to 10% of their annual revenues - which in Intel’s case would have been close to a whopping $4bn – things could actually have been a lot worse. The commission has also issued a ‘cease and desist’ order, which could force Intel to change its ways.

But what exactly is the firm supposed to ‘cease and desist’ from doing? Well, in the words of EU Competition Commissioner Kneelie Kroes: ‘Intel has harmed millions of European consumers by deliberately acting to keep competitors out of the market for computer chips for many years.’

The main competitor in question is Intel’s arch-rival AMD, which Intel has been accused of forcing out of the market by offering financial incentives to customers. These incentives have apparently taken the form of rebates to Intel clients for buying only Intel chips, and other incentives to design new computers around Intel’s processors rather than cheaper alternatives from AMD.

For its part, Intel has always maintained a vigorous defence, saying that its business practices are both legal and pro-competitive. As it is expected to appeal the decision, don’t expect anything very much to actually happen in the immediate future.

But the timing is all rather unfortunate, given that 35-year veteran and de facto co-founder of Intel Craig Barrett is to step down as chairman later this month. There are no suggestions, incidentally, that his departure has anything to do with the Competition Commission case. Although Barrett didn’t join the firm until some years after the other three – arguably better known – Intel progenitors, he deserves to take at least as much of the credit for the firm’s huge success as either Gordon Moore, Robert Noyce or Andy Grove. 

So much is different in the PC business today compared to the early 1970s – a time when, as Douglas Adams noted, digital watches were still considered a pretty neat idea – that Intel has had to reinvent itself several time over to stay in the game.  It’s a credit to Barrett et al that it has managed to do so.

By contrast the wheels of competition law grind exceeding slow. This current case originated in a complaint by AMD way back in 2000, and it’s far from over yet. Given that both plaintiff and defendant are still alive and kicking, and well able to keep fighting almost a decade later, you have to wonder exactly how anti-competitive any alleged activity has really been.

In today's bulletin:
Sainsbury profits as customers go back to Basics
Bank of England pours cold water on recovery optimism
EU fine to chip one billion Euros off Intel as Barrett steps down
SMEs: financing not the biggest problem?
Companies choose leadership continuity over change

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