Intel

Virgile Groc                                                                November 18th 2018

From European Law to European Competition Law - Introduction to the Law of the Internal Market of the EU

Case study on Intel : 

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On June 2009, the European Commission gave its biggest penalty of its history at that time. 1,1 billion € was asked to the software giant Intel for abuse of dominant position in the microprocessor sector. That penalty corresponds to a tougher policy of the European Commission for some years against disloyal competition.

The European Commission, created in 1957 with the Treaty of Rome, is one of the principal institutions of the European Union. The European Commission regroups 28 commissioners, one of each 28 members states of the European Union. The president is Jean-Claude Junker. The European Commission tasks look like a a national government. However, the EU Commission acts independently of the members states government and only in the interest of the EU. It is sometimes called the government of the EU, because it has different goals. One of them is to manage the EU policies and especially the budget policy. The other goals of the EU commission are to deal with the legislative side. Indeed, it proposes and enforces the EU laws because it has to ensure the EU interests. Therefore, the European commission policies has been more aggressive for several years especially for disloyal competition. Hence, numerous big companies as Microsoft, Google or Intel received important penalties.

Intel is an American computing firm created in 1968 by Gordon Moore, Robert Noyce and Andrew Grove. It is thanks to this company, we owe the creation of the microprocessor. Intel is also the first maker of semiconductor which enable little electrons to make electric current. Therefore, Intel has been dominating outrageously the microprocessor market since its creation in 1968. Its main competitor is AMD – Advanced Micro Devices - a Californian firm. Intel has a microprocessor market share of 80% and only 19% for Intel. The firm works a lot with Google, Facebook or Mac. Hence Intel represents a firm of 103,000 workers and a turnover of 55 billion $ in 2015. Moreover, the firm is quoted on the stock market and dispose of many sales subsidiaries.

Hence, why Intel decided to abuse of its dominant position whereas it is the leader of the microprocessor market? How did it affect this market? And what is the impact on the competition?

Therefore, to what extent the European Commission has to take actions against disloyal competition to regulate the EU economic market place?

AMD is the eternal rival of Intel. Indeed, they have been both competing to be the first leader of the microprocessor market for 25 years. Nevertheless, the relationship between these two big companies of the computing market started, however, well. Indeed, both smelters decided to work together in the mid 1970s when AMD created the microprocessor called 8080A which is a clone of the 8080 made by Intel. Then in 1982, AMD and Intel signed a cross license agreement. This agreement was asked by the firm IBM which was the client of Intel at that time for the creation of the first PC. Nevertheless, the American multinational company wanted at least two suppliers. Hence, AMD was the first company to provide the 8086 clone microprocessor, originally created by Intel.

However, that cohabitation between these two computers firm finished in the late 80s when Intel decided to stop suddenly working with AMD. Therefore, the cloner decided directly to complain for the first time against Intel in 1994 before the Supreme Court of California. The decision enabled AMD to get a cross license agreement with Intel in 1995.

Nevertheless, from that decision, both companies have been competing between themselves. AMD decided to stop acting as a cloner for becoming a creator. Then, the company adopt a strategy during the 90s which is to develop microprocessor not really powerful but low costs. At the beginning of 21th century, the competing is harsh between AMD and Intel (79% of the microprocessor market for Intel against 20% for AMD). Hence, AMD complained Intel by three times alongside the EU Commission - first time in 2000, then second time 2003 and third time in 2006 – for anticompetitive economic activities.

Finally, the legal affair between AMD and Intel is the result of long business relationship between two giants of the computer market. In order to lead their market, companies are often able to practice disloyal practices which are an impediment to economic freedom.

In 2009, the EU Commission and the General Court of the European Union considered that Intel contravened the Article 82 of the EU Commission and the Article 54 of the European Economic Area between October 2002 and December 2007. It means that Intel abused of its dominant position in order to exclude AMD from the x86 microprocessor market.

The strategy of Intel was to award exclusivity allowances to client computer companies or distributor’s compabues. However, firms were allowed to get the exclusivity if only they stocked up only of Intel microprocessors x86 while distributors had to sell to computers equipped of Intel chip. Hence, the company allowed exclusivity allowances, inter alia, to several clients included:

- Dell between December 2002 and December 2005 due to the fact Dell bought the entire of its x86 microprocessors to Intel.

- HP between November 2002 and May 2005 due to the fact Dell bought at least 95% of its x86 microprocessors to Intel targeted to its desktop computers.

- HP between November 2002 and May 2005 provided that HP steered the HP laptop computers equipped of x86 microprocessors made by AMD towards small and medium companies (SME) rather than big companies.

- HP between November 2002 and May 2005 provided that HP retarded the launching of six months the launching of its desktop equipped of a x86 microprocessors made by AMD targeted to companies from Europe, Africa and the middle east.

- Lenovo between January 2007 and December 2007 du to the fact Lenovo bought the entire of its x86 microprocessors to Intel for its laptop computers.

- Lenovo between June 2006 and December 2006 provided that Lenovo retarded and then canceled the launching of a laptop equipped of its x86 microprocessors made by AMD.

- Acer between September 2003 and January 2004 provided that Acer retarded the launching of a laptop equipped of its x86 microprocessors made by AMD.

Finally, Intel abused from October 2002 to December 2007 by abusing of its dominant position. Intel forced client companies to buy their products or retarded launching of AMD products by offering exclusivity allowances. That kind of disloyal competition affected the microprocessor market.

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