Neelie Kroes, the EU’s competition commissioner, displays an Intel X86 CPU during a news conference, in Brussels, Belgium Wednesday.

Intel Corp., the world’s biggest computer-chip maker, was fined a record 1.06 billion euros (US$1.45 billion) by the European Union for using rebates to thwart competitors.

“The fine is clearly designed to grab people’s attention,” said Michael Reynolds, an antitrust lawyer at Allen & Overy LLP in Brussels.

The commission’s attack on rebates may increase Intel’s troubles as computer sales decline amid the global economic crisis. Intel has kept its market share at about 80 percent by giving rebates to computer makers that buy all or most of their chips from the company, the commission said.

The EU said Intel gave rebates to computer makers between 2002 and 2005 on the condition that they buy at least 95 percent of chips for PCs from Intel. The commission said the Santa Clara, California-based company imposed “restrictive conditions” for the remaining 5 percent, which were supplied by rival Advanced Micro Devices Inc (AMD).

Intel will appeal the commission’s decision to the European Court of First Instance in Luxembourg, said Bruce Sewell, Intel’s general counsel, in a telephone interview.

‘Improper and incorrect’

“The decision is improper and incorrect,” said Sewell. “We have never refused to sell to a company and we have never required that a company not buy from AMD.”

“Intel has harmed millions of European consumers by deliberately acting to keep competitors out of the market for computer chips for many years,” EU Competition Commissioner Neelie Kroes said in a statement in Brussels. “Such a serious and sustained violation of the EU’s antitrust rules cannot be tolerated.”

The computer makers that were coaxed to not use AMD’s chips included Acer Inc., Dell Inc., Hewlett-Packard Co., Lenovo Group Ltd. and NEC Corp., the commission said.

The commission said Intel made payments to electronics retailer Media Markt on the condition that it only sell Intel-based PCs.

‘Real penalty’

The EU regulator said Intel’s unlawful practices must stop immediately and that it would “actively monitor Intel’s compliance with this decision.”

“What’s important isn’t just the monetary penalty, but the real penalty is the injunctive relief,” said David Balto, a former US Federal Trade Commission policy director who investigated and litigated a case against Intel in the 1990s.

“The EU recognized that the market is broken because of Intel’s bullying tactics,” said Balto, now a lawyer at the Lex Group in Washington.

Giuliano Meroni, president of AMD’s European unit, said in a statement that the decision “will shift the power from an abusive monopolist to computer makers, retailers and above all PC consumers.”

Source: Bloomberg