Intel May Be Edging Toward Antitrust Showdown in Europe

European regulatory authorities have taken a step toward bringing allegations that Intel (Nasdaq: INTC) is violating antitrust law closer to a resolution -- and the company's probable prosecution.

Officials investigating claims against the chip maker reportedly have presented their evidence to an internal panel of so-called "devil's advocates," a step taken before formal legal proceedings are launched.

If charges are levied, the competition commissioner will issue a statement of objections to the company. Intel's European antitrust woes began several years ago in Germany, with allegations that retailers were being pressured into stocking only PCs that were equipped with Intel chips. Complaints also surfaced over Intel's manufacturer rebate program.

Navigating the Rebate Issue

Surprisingly, rebates can be a gray area in anticompetition law, even in the United States, commented Tyler Baker, a partner with Fenwick & West in Silicon Valley.

"I don't know all of the details about the rebate systems Intel uses, but I can tell you it is a very much unresolved question in this country," he told the E-Commerce Times.

Many U.S. courts are hesitant to find that rebates are illegal, because they are a form of price competition -- which antitrust laws encourage, he explained.

However, pricing can subtly morph into a de facto exclusive dealer's arrangement when companies are required to buy large quantities of product to qualify for a manufacturer's rebate.

"Some courts have found that rebates can be set up or structured to be more than just price competition," Baker said.

Following Microsoft

Intel may be poised to head down the same path in Europe that Microsoft (Nasdaq: MSFT) has been on for the last several years. Microsoft's antitrust legal problems extend into many different areas, Baker noted, so the analogy is not a perfect one. It is, however, close enough.

"Intel is a very dominant company, and dominant companies are sometimes judged by different standards. That is true both [in the U.S.] and in Europe," he pointed out.

Intel might find, as Microsoft did, that business practices are not judged in isolation. While it might be unclear whether one activity could be considered an antitrust violation, the combination of several ambiguous business practices can add up to antitrust concerns in the eyes of regulators.

Whether charges will be filed is still uncertain, and it is too early to extrapolate any lessons from the latest events, Baker noted.

"If the EC brings a case, then other companies will have to pay greater attention, of course, to these issues," he said.

On the other hand, the European Commission may decide not to press charges. After all, the panel of devil's advocates was established precisely to ensure that poorly investigated cases do not enter the legal system. "That will also send a message," Baker said.