Intel up against years of antitrust actions
May 11th 2009 8:00AM
Updated Dec 3rd 2009 11:43AM
It appears that Intel (INTC) may be hit with huge antitrust fines by the European Union. An investigation into the practices of the world's largest chip company has been going on for years.
The allegation is that the company used its muscle and undue influence on PC and server companies to keep market share. Predatory pricing and special financial offers to customers may also have been a part of the behavior that could bring on sanctions against the company.
Whatever the exact charges and fines, Intel now faces a multi-year fight to defend its business practices that will extend to Asia and the U.S. According to the Financial Times, "In deciding how to shape and enforce a 'cease-and-desist' order, the E.U. regulator will confront a web of incentives and rebates offered by Intel to customers that have helped it dominate the market for PC microprocessor chips."
Almost all of the cases pending concern how Intel's business practices hurt smaller rival Advanced Micro Devices (AMD). The No. 2 PC chip firm has $5 billion in debt and barely makes money. Four years ago, its technology was strong enough to make strides against Intel. The larger company cut prices, which probably caused AMD to do the same and ruin its margins.
The E.U. fines will soon be old news. The fight Intel has on its hands in markets like the U.S. and Korea, which could spread to other countries, is ongoing. Since it takes government authorities long periods of time to build cases, Intel may be making the argument that it has not been a party to anti-competitive behavior from now to well into the next decade.
If the fine and sanctions sharply restrict Intel's business operations, it could be a very different company in five or ten years.
Douglas A. McIntyre is an editor at 24/7 Wall St.