Intel Illegally pays Sellers

EU antitrust regulators are expected to say this week that Intel Corp illegally paid computer makers to postpone or cancel the launch of products containing chips made by its main rival, sources familiar with the case said on Sunday.

The European Commission is set to decide on Wednesday to fine the world's largest chipmaker and order changes to its business practices for what the EU executive sees as "naked restrictions" to competition, the sources said. There was no indication of how big a fine might be levied. The largest fine levied by the EC for an abuse of market dominance was the 497 million euros ($655 million) demanded from Microsoft on March 24, 2004. The sources said the Brussels-based Commission is expected to rule that Intel committed two violations in which the firm abused its dominance of the market for central processing units, the chips at the heart of the world's 1 billion personal computers.

The EU executive will say Intel gave rebates to computer makers to restrict or eliminate the use of chips made by its rival, AMD, and provided other inducements to retailers to sell only machines with Intel CPUs. In its ruling the Commission will order Intel to end by a specific date those rebates which it deems to be illegal, the sources said. In its second finding, the Commission will say Intel paid PC makers to delay or scrap the launch of products containing AMD chips. The Commission will characterize the payments as "naked restrictions" to competition, the sources said. The Commission will state that the violations occurred during a period stretching back eight years, they said.

In committing the first violation, Intel set percentages of its own chips that it wanted PC makers to use, the sources said. For example, NEC Corp was told that 20 percent of its desktop and notebook machines could have AMD chips, the sources said. All Lenovo notebooks had to use Intel chips, as did relevant Dell products. The figure was 95 percent for Hewlett-Packard's business desktops, they said. European Commission spokesman Jonathan Todd said the commission had no comment. Intel spokesman Chuck Mulloy, speaking by telephone from California also declined to comment. The EU executive charged Intel in 2007 over illegal rebates to computer makers.

In July last year, it charged the firm with paying retailers not to sell PCs using AMD chips. Intel has said repeatedly it has done nothing wrong.