Intel handed record antitrust fine

Computer chip manufacturer Intel has received a record US1.45 billion fine from the European Union anti-competitive market behaviour that violated antitrust laws.

EU antitrust regulators allege that the corporation paid illegal rebates to computer manufacturers who bought the majority of their x86 processors from Intel instead of rival Silicon Valley manufacturer, AMD.

In a statement, EU competition commissioner Neelie Kroes said: “Intel has harmed millions of European consumers by deliberately acting to keep competitors out of the market for computer chips for many years,” the Washington Post reported.

Intel chief executive officer Paul Otellini hit back in a statement “we believe the decision is wrong and ignores the reality of a highly competitive microprocessor marketplace. There has been absolutely zero harm to consumers,” CNN reported.

Rupert Wilson, former managing partner of New Zealand law firm Chapman Tripp says the EU fine may encourage smaller market players in the IT industry to consider antitrust lawsuits against competitors.

“It will encourage smaller players but it really is an uphill task for a competitor to pursue a regulator to prosecute another competitor,” Wilson says.

The Intel CEO told reporters in a conference call “there was a significant amount of evidence that was either ignored, disregarded or both,” Yahoo! News reported.

Intel are to appeal the fine at the Court of First Instance, Europe’s second highest court.

This is not the first time AMD and Intel have engaged in legal disputes over competition law.

AMD accused Intel of breaking United States antitrust laws in 1991, alleging they tried to attain and hold a monopoly in the market for computer processing chips.

The case was settled in 1995, allowing AMD to use patented Intel technology in their own 386-style processor.

Intel has an 80 per cent market share in the microprocessor chip market today.

During a 2007 address to the American Antitrust Institute, Barack Obama said “antitrust is the American way to make capitalism work for consumers”.

The Obama administration has recently vowed to crack down on antitrust cases within the United States, coming as a reversal to the Bush administration trend of minimalising government intervention within the private business sector.

Intel is not the only IT heavyweight to face antitrust woes from the European Union in 2009.

EU regulators have accused Microsoft of bundling in their Internet Explorer web browser in with their operating system, Windows, in an illegal, anti-competitive manner.

Microsoft were due to respond to the allegations between June 3-5 but withdrew their application because the dates coincided with an antitrust conference in Zurich involving major EU regulators.

After the European Commission refused to postpone the hearing, Microsoft withdrew their appeal and have suggested that it could complain to the EU courts that its right to a fair hearing has been denied, nzherald.co.nz reported.

The corporation was subject to a similar antitrust case in 1998, over the same issue. The case, initiated by 20 US states and the Department of Justice, was eventually dropped in 2001.

The DOJ sought to break Microsoft up into two separate units, but backed down and decided to pursuer a smaller antitrust penalty instead.

The EU ruled in 2004 that Microsoft unfairly used their operating system to benefit their own server and media player software, resulting in a US$1 billion antitrust fine.

Third year Victoria University law student Sam Humphrey says the result of the Intel case could be beneficial to open source software developers.

“For open source developers, the biggest issue is exposure, not quality,” he says.

Mr Humphrey says the simple reason open-source programs aren’t as successful is that people aren’t looking for alternatives to their basic software which performs bare-bones functions.

The New Zealand Open Source Society has recently called for the government to stop all G2009 negotiations with Microsoft and an evaluation of state funds being spent on Microsoft product.

Society president Don Christie says taxpayers are constantly being charged too much for software.

In an IT conference with government officials, Christie spoke about “how organisations like Microsoft have been behaving” in monopolistic market positions.

Open source software, such as web browser Mozilla Firefox, is distributed with access to the program’s source code, which allows users to alter and modify the program. Open source software is free to use in terms of cost and licensing.

A source code consists of a series of statements which tell a computer program how to function.

The source code for closed source software is considered a trade secret, meaning users are prohibited from accessing it.

The often heated closed versus open source software and antitrust law debate was depicted in the 2001 Ryan Phillippe film Antitrust.

After the film’s release, it was speculated that the market-savvy, opportunistic software CEO in the film, played by Tim Robbins, was based on former Microsoft chairman Bill Gates.