Intel Corp. (INTC:US) was fined 1.06 billion- euro ($1.33 billion) for using rebates to block rivals after European Union regulators ignored exonerating evidence to build an “extreme case,” lawyers told an EU appeals court.
The EU’s antitrust regulator’s 2009 decision was based on speculative evidence that helped support its analysis that Intel had offered rebates conditional on excluding a rival from the market and omitted other non-incriminating information.
“The commission ignores the exculpatory emails and focuses on those which support its extreme case,” Nicholas Green, a lawyer for Intel, told the EU General Court in Luxembourg on the hearing’s second day. The evidence used was “irrelevant,” he said.
The EU probe concluded Santa Clara, California-based Intel impeded competition by giving rebates to computer makers from 2002 until 2005 on the condition that they buy at least 95 percent of chips for personal computers from Intel. Intel then imposed “restrictive conditions” for the remaining 5 percent, supplied by Advanced Micro Devices Inc. (AMD:US), which struggled to overcome its rival’s hold on the market for PC processors, the EU said.
The documents concerning Dell Inc. (DELL:US) that Intel wanted the EU to consider “don’t really help” Intel’s case and don’t absolve the company, said Nicholas Khan, a lawyer for the commission.
A fifth of Dell’s operating income came from Intel rebates in 2004 according to the U.S. Securities and Exchange Commission’s 2010 accounting fraud case against the Round Rock, Texas-based company. That rose to “a zenith of about 70 percent” after the infringement period in the EU case, Khan said, citing the SEC report.
The EU court should assess Intel’s claims in the light of the incentives it offered Dell, the secrecy of the practices, “and the sheer scale and rising scale of these payments by over 500 percent during the infringement period alone,” he said.
The computer makers allegedly coaxed to avoid AMD’s chips included Acer Inc. (2353), Dell, Hewlett-Packard, Lenovo Group Ltd. (992) and NEC Corp. (6701), the commission said in 2009. Intel made payments to Metro AG (MEO)’s electronics retailer Media Markt on the condition that it only sell Intel-based PCs, the EU said. It ordered Intel to stop using illegal rebates to thwart competitors, an instruction that Intel complained was unclear.
The court hearing will focus in turn on the alleged agreements between Intel and each of the computer makers, starting with Dell.
“Dell constantly used the threat of switching to AMD to obtain better terms,” Green said. “That is inconsistent with Dell being scared of an Intel reaction or considering itself at risk of a disproportionate consequence if it switched.”
Dell switched to AMD in 2006 and announced it in a press release, Green told the five-judge panel. “This alone undermines and destroys the commission’s theory of conditionality,” he said.
“If it had been induced to stay loyal by a fear of disproportionate consequences it would not have switched and it would not have shouted loudly to the world about its decision to switch,” said Green.
“Of course” Dell was always free to choose an alternative supplier, Kahn said. “The issue in the case is not whether it was free to do so, the issue is what were the consequences.”
The EU began investigating after AMD complained about the rebates in 2000. Intel agreed to pay AMD $1.25 billion in 2009 to end all litigation by the rival. Sunnyvale, California-based AMD is no longer involved in the case and won’t intervene at this week’s hearing after settling with Intel, according to court records.
Any decision by the EU General Court can be appealed to the EU Court of Justice in Luxembourg. The hearings will conclude July 6.
The case is T-286/09 Intel Corp. v. Commission.
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