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EC Widens Its Antitrust Probe of Intel

By Keith Regan
Sep 11, 2006 1:50 PM PT

The European Commission, the regulatory arm of the European Union, said Monday that it is expanding its investigation into possible antitrust behavior on the part of leading chip maker Intel by taking over a case involving a major electronics retail chain.

EC Widens Its Antitrust Probe of Intel

The EC has long been looking into complaints that Intel used strong-arm tactics to prevent PC makers operating in Europe from using chips from rival Advanced Micro Devices.

The commission is taking charge of a probe into Media Markt, which operates more than 350 stores in 14 European countries. German officials had started that inquiry, but the EC said it made more sense to roll it into the overall antitrust probe.

AMD had asked German officials to look into its complaints about Media Markt in July, saying its inability to gain access to the chain's customers greatly hurt its ability to be competitive in Europe. Media Markt has carried only Intel-based PCs since the mid-1990s.

The EC said in a statement that it is "looking at a range of tactics allegedly used by Intel to limit the market penetration of AMD," including whether Intel pressured Media Markt into not stocking AMD-based PCs on its shelves.

Intel has been dogged by antitrust questions in Europe for several years. Last year, the investigation stepped up significantly when officials staged a series of raids at Intel offices in several countries and at some PC resellers, apparently seeking insight into Intel's pricing and supply agreements.

Fighting on Many Fronts

AMD has long suffered as a result of Intel's massive market share, which still hovers at around 80 percent worldwide, despite recent gains by AMD. Intel's size has enabled it to use pricing to stave off serious threats to its dominance over the years.

AMD charges that Intel has resorted to more-aggressive tactics, though, including threatening to shut off PC makers from Intel chip supplies if they embrace AMD technology. In a civil antitrust suit filed last year, AMD said it knew of 38 companies on three continents that were coerced by Intel into buying more of their chips -- and fewer AMD products. Those companies include PC makers, systems integrators, retailers and value-added resellers.

Trade commissions in the U.S., Japan and elsewhere have also investigated Intel's market behavior over the years.

Familiar Refrain

In the U.S., federal authorities sued Intel in the late 1990s, saying it used its market power to extract trade secrets from some customers -- which, in theory, made it easier for Intel to design products they would be inclined to purchase. That case was later settled; Intel did not admit to any wrongdoing.

The Intel-AMD clash gained steam in 2003, when AMD complained that customers steered clear of its 64-bit chip line even though it beat Intel to market by several months.

Ironically, AMD's recent competitive resurgence may be the foundation for Intel's strongest argument that it is not a monopoly and that it lacks the power to behave in a way that would trigger antitrust concerns, said Insight64 analyst Nathan Brookwood.

"Intel has always maintained that it is susceptible to competitive threats," he said, and therefore can't be considered a monopoly. "The past few quarters have proven that to be the case."

AMD has made gains across the market space -- with PC makers increasingly producing machines with both processors, and enterprises scooping up Opteron-based servers. While the response from Intel is likely to be a powerful one, and Intel's overall market share lead does not appear to be at risk, Brookwood said the landscape has changed entirely.

Intel underscored the new world order just last week when it announced it would cut some 10,500 workers worldwide as part of a massive restructuring aimed at cutting costs and making the chip maker more lean and profitable.


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