Antitrust Case

The European Commission said sent a "statement of objections" to Intel on Thursday alleging that it tried to exclude competitor Advanced Micro Devices Inc. (AMD) from the market. Intel could face fines if it is found guilty of infringing on EU antitrust rules.

Intel has abused its dominant market position, the European Union statement said.

The EU said Intel gave computer makers "substantial rebates" for buying their x86 CPUs from Intel. They were allegedly offered below cost to strategic customers, such as governments and universities, according to the EU statement. Intel also allegedly paid manufacturers to delay or cancel product lines which used AMD chips.

"The rebates offered by Intel were of such a quantity and such an amount that an efficient competitor would be forced to price below cost," European Commission spokesman Ton Van Lierop told Reuters. "We think that would be bad for competition and bad for consumers."

The EU said below-cost or predatory pricing may be good for consumers in the short term, but is ultimately harmful because it kills off competition, which offers more choice and innovation in the long term.

Intel dominates world chip market

Intel replied that its conduct has been lawful, good for competition and beneficial to customers.

"We are confident that the microprocessor market segment is functioning normally and that Intel's conduct has been lawful, pro-competitive, and beneficial to consumers," Intel's general counsel Bruce Sewell said.

Intel controls 80 percent of the global market for the central processing units, or CPUs. The rest are made by AMD.

Focusing on price

AMD spokesman Jens Drews said PC manufacturers operate on thin margins and Intel's loyalty rebates have forced AMD to focus on price rather than performance.

"Their financial strength is poisoning the industry," Drews was quoted as saying by the Associated Press. "What we see is that we have not been competing on a level playing field."

Intel has 10 weeks to reply to the statement and will then have the right to a hearing with EU regulators. Intel will face a fine if the commission finds it has engaged in anti-competitive conduct.

But most cases take several years before they are settled. Intel's Sewell said he's awaiting a ruling on the Microsoft case. In 2004, the European Commission found Microsoft had competed unfairly and levied a fine of nearly $500 million ($686 million). Microsoft has appealed the decision.