BRUSSELS (Reuters) - Intel Corp <INTC.O> chief executive Paul Otellini arrived at a closed hearing on Tuesday to fight charges the world's largest chipmaker abused its dominance and used illegal rebates to hurt a smaller competitor.
By David Lawsky
BRUSSELS (Reuters) - Intel Corp <INTC.O> chief executive Paul Otellini arrived at a closed hearing on Tuesday to fight charges the world's largest chipmaker abused its dominance and used illegal rebates to hurt a smaller competitor.
Intel's central processing units are at the heart of four out of five of the world's 1 billion computers and servers, with the others made by rival Advanced Micro Devices Inc <AMD.N>.
The European Commission, the executive arm of the European Union, has charged that Intel has made payments to computer makers to prevent them from using AMD chips. Intel says it competes hard against its competitor, but acts legally.
!ADVERTISEMENT!Hearing Officer Karen Williams will not make a decision on the fight between the two California-based chip makers, but will report her views to Competition Commissioner Neelie Kroes.
Kroes, who pursued Microsoft for abusing its dominance and recently fined it 899 million euros ($1.38 billion), will recommend a final decision to the full European Commission.
Williams was expected to give Intel most of Tuesday to tell its side of the story and answer the Commission's allegations.
Some of those in the room will have to leave at points because proprietary information is to be discussed.
The U.S. Federal Trade Commission and New York attorney general's office, both of which are looking at Intel for possible antitrust violations, were represented.
Williams will spend most of Wednesday listening to others interested in the case. They include consumer organizations: BEUC, a European umbrella group for consumer groups, and individual groups from the Netherlands, Spain and France.
They said they only had a charges summary and no account of Intel's reply. For now they expressed no view on the allegations.
"We may do so later," said Monique Goyens, BEUC director general. She said BEUC wants to make certain any decision takes into account consumer concerns about price and innovation.
AMD was also there and Hewlett Packard <HPQ.N>, both slated to be there, will also be heard on Wednesday.
Much of the hearing will focus on the computer makers as their relationship with Intel figures heavily in the charges.
The Commission in mid-2007 publicly alleged three kinds of violations by the chipmaker.
It said Intel gave computer makers rebates on condition they agreed to obtain most or all of their CPUs from Intel and that it made payments "to induce (computer makers) to either delay or cancel the launch" of products using AMD chips.
The Commission also said Intel sold CPU chips at below cost to strategic customers such as governments and educational institutions.
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.
Finds of those raids will not be considered at the hearing.
The Commission could later choose to widen its case and issue new charges as it did three times in its antitrust battles against Microsoft <MSFT.O>.
Alternatively it could find Intel broke the law and order it to change its business practices. Intel may also face a fine, unlikely to reach the cap of 10 percent of annual turnover.
Failure to change business practices as ordered can be expensive. The Commission has fined Microsoft 1.18 billion euros for failing to comply with remedies imposed in 2004, on top of a 497 million euro fine imposed originally.
(Reporting by David Lawsky; Editing by Elaine Hardcastle)
