EU competition commissioner Neelie Kroes shows a computer chip at a news conference in Brussels. (Reuters)

Brussels, May 13: The European Commission today fined Intel a record $1.44 billion for abusing its dominance in the computer chip market to exclude its only serious rival, Advanced Micro Devices.

The EU competition commissioner, Neelie Kroes, said the penalty against Intel, the world’s largest chip maker, was justified because the company had skewed competition and robbed consumers of choice.

Kroes said Intel “used illegal anticompetitive practices to exclude its only competitor and reduce consumers’ choice — and the whole story is about consumers .” She added that Intel’s practices “undermined innovation”.

The previous record fine for similar abuses in the EU was $677 million at current exchange rates, imposed on Microsoft in March 2004 for blocking competition in markets for server computers and media software.

The fine also is the largest ever imposed for any breach of competition law in the EU, beating by a significant margin previous record amounts of hundreds of millions of euros levied on chemical and cement companies over the past decade.

Kroes said Intel had pursued a strategy aimed mainly at excluding AMD by paying computer makers and retailers to postpone, cancel or avoid AMD products entirely.

The commission found that Intel “went to great lengths to cover up its anticompetitive actions,” Kroes added. She ordered Intel to cease offering rebates to computer makers that had helped it maintain a share of about 80 per cent of the market for microchip sales and blocked AMD from increasing its share beyond about 20 per cent of that market.

Paul Otellini, the chief executive of Intel, said today the company would appeal. “We believe the decision is wrong and ignores the reality of a highly competitive microprocessor marketplace,” Otellini said. “There has been absolutely zero harm to consumers.”

Giuliano Meroni, the president of AMD’s operations in Europe, said the EU decision would “shift the power from an abusive monopolist to computer makers, retailers and above all PC consumers”.

Under the order, Intel must change its business practices immediately pending its appeal, although it could ask for an injunction.

Intel also must pay the fine right away, though that sum would be held in a bank account until appeals are exhausted, a process that could take years. The commission is entitled to levy fines up to 10 per cent of a company’s annual global sales.

Intel’s annual sales were $37.6 billion in 2008, thus the company could have faced a maximum penalty of close to $4 billion. Money collected in antitrust cases is added to the trade bloc’s annual budget. “Now they are the sponsors of the European taxpayers,” said Kroes.

Yesterday, speaking to investors gathered at the company’s headquarters in Santa Clara, California, for an annual meeting, Otellini had vowed Intel would continue spending vast sums of money towards advancing its manufacturing lead over rivals. Intel has long embraced a strategy of keeping its research and development investments high during downturns as a means of applying more pressure on competitors when better times return.

The decision to impose severe punishment on Intel is another reminder of the emergence of European regulators as some of the world’s most activist enforcers of antitrust law.