Intel 'mystified' over 'illegal' rebates

Antitrust regulators around the world, led chiefly by the European Commission, are testing the limits of the law in their pursuit of Intel and its practice of offering rebates to computer manufacturers and IT retailers, Intel Senior Vice President Bruce Sewell said on Wednesday.

He spoke to journalists shortly after the European Commission found Intel guilty of abusing its dominant position in the microprocessor chip market in Europe, at the expense of its only significant rival, AMD.

The Commission fined Intel a record €1.06 billion and ordered it to stop handing out rebates to PC manufacturers and retailers on condition of near or total exclusivity. It also ordered the firm to stop paying PC makers to delay the launch of models equipped with AMD chips.

Antitrust authorities in South Korea and Japan have also found fault with Intel's marketing methods, including rebates, and the US Federal Trade Commission (FTC) and New York Attorney General's office are both investigating Intel for abuse of its monopoly position.

"Today's ruling isn't against rebates, just the rebates that abuse a market position," competition commissioner Neelie Kroes said during a press conference convened to announce the antitrust decision.

It is, she said, a very clear cut case of abuse of a dominant position. "I can't imagine it's unclear what has to stop."

But Intel's Sewell said it is very unclear. "I am mystified as to what it is we are being asked to change," he said, adding that the ruling fails to distinguish between permissible and illegal rebates.

Intel said it will appeal the ruling, a process that could take several years.

And in what appeared to be a rebuke of antitrust authorities the world over, Sewell said: "There's been an evolution in antitrust law and how rebates are to be conducted by dominant companies. We see a line of thought coming mainly from the European Commission - but also in Korea and Japan - that rebates can be anti-competitive."

"Antitrust agencies are testing the boundaries of the law," he said.

Last year Korea's Fair Trade Commission (KFTC) fined Intel $25 million and ordered it to stop paying PC manufacturers rebates in return for excluding AMD chips. Intel is appealing the ruling. In 2005, the Japan Fair Trade Commission (JFTC) ruled that Intel had violated the country's anti-monopoly laws by illegally forcing full or partial exclusivity with five Japanese PC makers in return for rebates.

Sewell said the company settled with the Japanese authorities and escaped being fined after agreeing not to apply certain types of rebates.

"In Japan, we were told to stop certain types of rebates which we weren't even using, never had done. Three years on nothing in that market has changed and no one is contesting whether we are in compliance," he said.

As for the US, Sewell said he read the comments by Christine Varney, the new chief of the antitrust division of the Justice Department "with great interest" and vowed to work closely "with all agencies".

Earlier this week, Varney effectively called an end to eight years of inertia in the department she has taken over. The Obama administration will vigorously enforce antimonopoly laws and work more like the Commission in tackling monopoly abuse, she said. Not one antitrust case was pursued under the two Bush administrations.

Kroes welcomed Varney's comments. "They give me a huge positive feeling. The more competition authorities join with us the better," she said, adding she was confident there would be a close working relationship in antitrust across the Atlantic.