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Intel Contests $1.4B Antitrust Fine Levied by European Union

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Chipmaker Intel Corporation (INTC) has appealed to the European Court of Justice, European Union’s (“EU”) top court, to overturn the $1.44 billion (1.06 euro) antitrust fine, stating that the lower court’s judgment to uphold the decision was unjustified and had legal errors.

In June, Intel lost its five year old legal battle wherein it had appealed against the EU’s judgment to levy a record $1.44 billion fine (1.06 euro) on the chipmaker for allegedly using anti-competitive practices against fellow competitor Advanced Micro Devices (AMD).

The General Court of Luxembourg, EU's second-highest court, upheld the decision by the EU to penalize Intel, asserting that the judgment was both appropriate and justified given the nature of the incident. The fine is the biggest single antitrust penalty imposed for market abuse by the EU.

The battle dates back to 2009, when the European Commission’s regulatory investigation found Intel guilty of breaching anti-trust laws in the period 2002-07. Intel tried to illegally persuade PC makers including Dell, HP and Lenovo to buy its chips over competitors. Intel had allegedly offered them rebates if they agreed not to use competing products from AMD. In addition, Intel also tried to block rival AMD by making payments to HP, Lenovo and Acer to delay or stop the launch of computers using AMD chips.

However, Intel challenged those facts, claiming that the chipmaker lawfully contested against AMD and others and that its business practices have never violated antitrust or other laws.

Intel, therefore, sought an annulment of the verdict. On failure, it appealed for a significant reduction in the fine. However, the EU's General Court rejected the plea and ruled against the arguments raised by Intel, declaring the fine imposed to be proportionate.

Intel has yet again decided to take the five-year old case further by approaching the Court of Justice to overturn the record antitrust fine.

We prefer to wait and see the outcome of the appeal as the public has already tried and convicted Intel over the issue, so further damage to its brand name will be limited. The impact on its financials will also be limited since the amount was provided for by the company in the June quarter of 2009 and followed by a settlement with AMD in the fourth quarter of that year.

In any case, Intel’s cash position was solid at $3.0 billion at the end of the second quarter of 2014. It generated $5.5 billion of cash during the quarter. Of course, Intel does have many challenges at the moment, not the least of which is competing technologies from companies like NVIDIA Corporation (NVDA) and Arm Holdings (ARMH).

Intel shares carry a Zacks Rank #1 (Strong Buy).

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