By CHARLES FORELLE European Union regulators hit Intel Corp. with a €1.06 billion ($1.45 billion) fine -- the largest every assessed for monopoly abuse -- and called for changes in the way the U.S. company sells the microprocessors at the heart of most of the world's personal computers.
Intel said it would appeal the fine, but Wednesday's decision confirmed the EU's role as jurisdiction of choice for U.S. tech companies seeking redress from larger competitors, even as the new U.S. administration says it plans to get tougher in pursuing monopoly practices.

Associated Press

The European Commission, the EU's executive arm, said Intel broke EU rules by using the threat of withdrawing rebates it offered to large computer manufacturers, its customers, to pressure to them to buy all or most of their chips from Intel rather than rival Advanced Micro Devices Inc.
Intel also paid manufacturers to delay the launch of AMD-based computers and paid a retailer, Media Saturn Holding, to sell only Intel-based machines, the EU said. Media Saturn operates the Media Markt chain in Germany.
"Intel has harmed millions of European consumers by deliberately acting to keep competitors out of the market for computer chips for many years," said Neelie Kroes, the EU's top antitrust regulator. "If we smell that there is something rotten in the state, we act."
Besides the fine, which amounts to almost a fifth of the $7.79 billion in cash on the company's balance sheet, Intel was ordered not to offer the conditional rebates that the Commission deemed problematic. But the regulator left vague how it would police that order.
The Santa Clara, Calif., company had revenue of $37.6 billion in 2008.
The Intel decision in Europe comes as U.S. regulators jettison Bush-era legal guidance that led to narrow scrutiny of monopolists. In a speech Monday, Department of Justice antitrust chief Christine Varney said regulators "cannot sit on the sidelines any longer." That could mean greater convergence with European regulators, who have been more willing to bring antimonopoly actions, including a marathon case against Microsoft Corp. Ms. Varney knows the field well: She represented browser-maker Netscape in the U.S. antitrust prosecution of Microsoft in the 1990s.

Neelie Kroes

Ms. Kroes said the Justice Department's stance gave her a "huge positive feeling. The more competition authorities joining us in our competition philosophy, the better it is."
At its heart, the EU's case against Intel is a classic monopoly prosecution: Intel, the EU alleges, used its muscle -- particularly with rebates -- to push smaller rival AMD to the margins of the market.
In one case, the EU said, Intel for two and a half years made rebates to one manufacturer conditional on that manufacturer "purchasing no less than 95% of its CPU needs for its business desktop computers from Intel." The EU said Intel gave conditioned rebates to computer manufacturers were Acer, Dell Inc., Hewlet Packard Co., Lenovo Group and NEC Corp.
Intel chief executive Paul Otellini said in a statement that the company takes "strong exception to this decision," which he called "wrong." He also stressed a point that Intel has made regularly: that prices over the years have fallen for computers and chips. There has been "absolutely zero harm to consumers," he said.
Mr. Otellini didn't directly address rebates, but said thanks to investments in manufacturing facilities, "we can discount our products." He denied that Intel sells below cost.
Intel said it would challenge the decision at the Court of First Instance in Luxembourg, which hears appeals of the actions of the EU antitrust regulator and other branches of EU's executive arm. The court process is likely to take years.
Getting this far hasn't been easy. Nearly nine years in the making, the case required even more gestation than the EU's seminal 2004 decision condemning Microsoft for monopoly violations. Some career regulators inside the tech-industry unit of the EU's competition directorate have spent a decade on the two cases. Microsoft's fine of €497 million in 2004 was a record at the time for a monopoly case; last year the EU added €899 million to Microsoft's tab for not complying with the 2004 decision.
Intel's run-in with the EU began with a complaint from AMD in 2000, four years before Ms. Kroes took up her post. The case nearly outlasted her; Mrs. Kroes's term is scheduled to end this year.
Intel won't have to shell out cash for the fine immediately; it can provide a bank guarantee for the amount, an Intel spokesman said.
Monopoly-abuse cases are relatively rare in the EU system, and the appeal sets up the Court of First Instance for a significant ruling on the scope of antitrust jurisprudence in Europe. In a series of cases earlier this decade, the court sharply rebuked the EU's merger-control procedures; the result has been a years-long dearth of challenges to mergers by the bloc.
But the court has given the EU regulator a far wider berth in monopoly cases -- in a critical 2007 ruling, it backed the EU's 2004 Microsoft decision. In that judgment, the court was disinclined to second-guess the EU's findings of law or fact, and endorsed a view that the regulator has broad authority to bring monopoly cases so long as its reasoning is careful and thorough.
The legal issues in Intel's appeal will be different, but the specter of Microsoft's loss will loom large.
Intel is likely to press its appeal on at least two fronts: One focus is likely to be the EU's economic analysis of the market. In closed-door proceedings, Intel has laid out an alternate analysis that gets to a higher cost for its chips -- an attempt to undermine the EU's argument that Intel has effectively dumped low-cost chips on the market to thwart AMD.
Intel has also argued that the market functions well -- when the company has technological advances, it gains share; when AMD surges ahead technologically, as it did with a move to so-called 64-bit chips, AMD reaps better sales.
Another focus will be the nature of any arrangements between Intel and its customers. An Intel spokesman, Chuck Mulloy, says Intel will argue that deals weren't exclusive. Documents and other evidence not cited in the EU's decision, he says, cast the deals in a different light -- in October, Intel went to the Luxembourg court to seek to compel the EU to include these and other documents in its ruling. (The court declined to do so.)
Outwardly, Intel has maintained a more cordial relationship with the EU than had Microsoft, which was quicker to express its frustration. But the two sides have nonetheless been tense and distant. While Microsoft's top executives shuttled to Brussels in a last-ditch attempt to work out a settlement, Intel hasn't had any settlement discussions. Mr. Otellini has had only one, brief meeting with Mrs. Kroes.
EU officials were frustrated that Intel went to court to seek inclusion of the additional documents, which they saw as a delaying tactic. Intel, for its part, has chafed at the less-adversarial way Europe polices companies: antitrust regulators at the Commission have the authority to issue fines and order changes in behavior directly. In the U.S., antitrust enforcers bring actions before a judge or jury, and the two sides fight it out.
Intel's position in the market for microprocessor chips expanded after Intel technology was selected by International Business Machines Corp. for its first line of personal computers, which came out in 1981. IBM, wary of relying on a single supplier for such a key component, required that Intel license its so-called x86 technology to other manufacturers.
Intel and AMD, one of the licensees, have fought a series of legal battles since that relationship broke down in the late 1980s.
The U.S. Federal Trade Commission began investigating Intel's conduct in the next decade. In 1999 Intel settled allegations that it cut computer manufacturers with whom it had other disputes out of patent licenses needed to build Intel-based systems.
More recently, regulators around the world have been zeroing in on Intel's system of discounts and incentives to manufacturers who build PCs and computer servers.
In 2005, regulators in Japan ruled that Intel made illegal payments to manufacturers to induce them to limit purchases of AMD chips. Last year, South Korean regulators found that Intel gave unfair discounts to manufacturers; Korea fined Intel $25 million.
The FTC is also renewing its scrutiny. Last year it upgraded a long simmering probe to formal status, and FTC officials have been coordinating with their European counterparts. A private antitrust suit filed by AMD, which dates to 2005, is in a Delaware federal court. Trial is scheduled for next year.
—John. W. Miller contributed to this article.
Write to Charles Forelle at charles.forelle@wsj.com