Abstract

On May 13, 2009, the European Commission (EC) imposed a € 1.06 billion fine on the world’s largest semiconductor company, Intel Corporation (Intel), for violating the antitrust policies of the European Union. This was considered to be the highest fine ever charged in the history of EC. Intel was accused of engaging in anti-competitive business pra-ctices for gaining dominance in the micro-processors market by driving out competitors like Advanced Micro Devices (AMD) from the market. One of the major charges against Intel was that it gave conditional rebates to Original Equipment Manufacturers (OEMs) for committing themselves to buying all the x86 microprocessors from Intel. It also made payments to Media-Saturn Holding, a German retailer, on the condition that its stores sold only Personal Computers (PCs) with Intel’s microprocessors. Another important charge against Intel was that it allegedly made payments to PC manufacturers to delay or cancel the launch of other PCs equipped with x86 microprocessors manufactured by Intel’s competitors and limiting the distribution channel, thereby controlling the availability of these products in the market. The EC investi-gations began after AMD lodged a complaint in 2001. After several years of investigations, EC found Intel guilty and levied a historic fine and gave a ruling that required Intel to stop offering illegal rebates to OEMs and indulging in other anti-competitive business practices intended at driving AMD out of the micro-processors market. Some analysts felt that the EC ruling would enable AMD to gain access to the market largely dominated by Intel. On the other hand, some analysts felt that the ruling would be an impediment to innovations in the industry and would result in affecting the European economy.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

• Study and analyze the antitrust allegations against Intel and the company’s response thereof
• Understand the concept of competition and pricing
• Discuss and debate whether Intel was behaving in a monopolistic way
• Under-stand the importance of knowing rules of competition by companies operating in foreign countries
• Examine the challenges of being a market leader in the wake of EC’s ruling on Intel

Keywords

Competition, Monopoly, Duopoly, Anti-competitive, Antitrust, Pricing, Rebates, market dominance, competitive advantage, Abusive marketing, Innovation, Original Equipment Manufacturers, European Union, European Commission, Microprocessor, Federal Trade Commission, Intel, Advanced Micro Devices, AMD