The EU finally fined Intel (INTC) for anti-competitive behavior and the amount of the fine was staggering–$1.44 billion. Intel has been accused of using pricing and special rebates to undermine the sales of its smaller rival AMD (AMD). AMD has $5 billion of debt and rarely does better than breakeven. It is faced with the prospect of cutting the size of its operations more than it already has.
According to Fox News, “EU regulators said they calculated Intel’s fine on the value of its European chip sales over the five years and three months that it broke the law.” The word’s largest chip maker will fight the action which could take many years and tens of millions of dollars in legal fees.
The ruling and fine will not help Intel with similar disputes in South Korea and the US. If the authorities in those countries rule similarly to the EU, the amount of the total fines the firm faces could go up considerably. More important, Intel’s approach to doing business may have to be sharply altered and that could eventually hurt earnings.
Intel will be challenged by several years of fighting allegations and fines. Winning legal wars with sovereign governments is difficult if not impossible, but Intel does not have much choice unless it want to admit its guilt, pay the fines, and say it will go and sin no more. That would be an uncharacteristic action for a big American company trying to defend its turf.
Douglas A. McIntyre
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