EU defends action against Intel after report leaked

August 8, 2009
A US computer chip giant Intel factory is pictured in Leixlip, near Dublin, Ireland in July 2009. The EU Commission on Saturday defended its record-busting anti-trust action against Intel, following a report that it missed evidence which could have boosted the US computer chip giant's case.

The EU Commission on Saturday defended its record-busting anti-trust action against Intel, following a report that it missed evidence which could have boosted the US computer chip giant's case.

EU antitrust regulators fined a record 1.06 billion euros (1.45 billion dollars) in May, claiming the abused its stranglehold on the to crush its main rival.

However, the European Union Ombudsman is set to deliver a report to the European Commission accusing it of "maladministration", according to US media reports.

Commission spokesman Alain Bloedt on Saturday defended the EU action in the case which Intel is challenging, raising the spectre of a new antitrust saga between Brussels and a US technology giant after Microsoft's years of European legal battles.

"The commission can reassure you that it surely respected Intel's right of defence," Bloedt told AFP.

The EU's executive arm however would not comment in detail on an ombudsman's opinion which was not yet published, he added.

EU Ombudsman P. Nikiforos Diamandouros will berate the commission for not formally recording an account of a meeting with a senior Dell executive, who rated the performance of Intel rival Advanced Micro Devices as "very poor", the Wall Street Journal reported.

Such an opinion could imply that Dell chose to buy and use Intel's chips on merit rather than because they were commercially pressured to do so.

The European Commission, Europe's top competition watchdog, charged Intel with using illegal loyalty rebates to squeeze rivals out of the market for central processing units (CPUs) -- the brains inside personal computers.

The Santa Clara, California-based company dominated the 22-billion-euro (30-billion-dollar) market for the ubiquitous x86 CPUs with a 70-percent share during the more than five years it was accused of breaking EU antitrust rules.

"Intel has harmed millions of European consumers by deliberately acting to keep competitors out of the market for for many years," EU Competition Commissioner Neelie Kroes said in May.

The commission said Intel had used wholly or partially hidden rebates to get PC makers such as Acer, Dell, HP, Lenovo and NEC to buy all or almost all their CPU supplies from Intel instead of AMD.

Intel has defended the rebates, arguing that computer makers approach the company seeking price reductions.

EU also accused Intel of paying computer manufacturers to halt or put off the launch of products containing microchips competing with Intel's x86.

The commission ordered Intel to cease any of the ongoing practices which it deemed to break EU rules.

Intel did not hesitate in challenging the commission's ruling.

Intel's fine topped the previous record 899 million euros Microsoft was ordered to pay last year for failing to cooperate with the European Commission in its antitrust battles with the US software giant.

(c) 2009 AFP

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Microsoft, Intel, American shareholders: European protectionism.

Intracommunity discrimination: Belgium, zone of not-right.

Is incompetence of the European commission, partiality of the aforesaid the Commission, hypocrisy, what's the role of the European Court of justice? In these times of universalization and savage competition which animate the continents and the companies, one can only wonder about extravagances of the Commission.

Arguments of the Commission:

State Aids.

According to the European commission, %u201Ca company which receives an official support has an undue advantage compared to its competitors. Therefore the EC treaty prohibits generally State aid, unless they are not justified by reasons of general economic development. To take care that this prohibition is respected and so that the exemptions are applied in a uniform way as a whole of the European Union, the European commission is charged to control the conformity of the State aid with the rules of the EU.

European Commission must initially determine if a company received a State aid, which is the case if the support which is granted to him fills the following criteria:
1) there is intervention of the State or by means of resources of State; this one can take various forms (for example, subsidy, interest rebate, tax reduction, guarantee, acquisition of a holding total or partial of the State in the company or supply of goods or services in preferential conditions, etc);
2) the intervention is suitable for affect the exchanges between Member States;
3) the intervention confers an advantage to the recipient in a selective way, for example because it is limited to some companies or some branches of industry, or with companies located in areas given;
4) competition is distorted or is likely to be it.

On the other hand, measurements of general nature are not regarded as State aids because they are not selective and that they are applicable to all the companies, independently of their size, their geographical location or their branch of industry.

Thus, article 87 contains the rules of substance governing the State aids, namely the general principle according to which the State aid is incompatible with the Common Market, as well as a list of possible exemptions. The European commission adopted some number of guiding lines and interpretative framings clarifying the modes of enforcement of the exemptions, so as to guarantee a coherent application of the rules on the State aid in all the Member States and the branches of industry. One can quote like examples the Community framing of the State aid with the R&D and the Community framing of the State aid for environmental protection.

In the fields where the Commission acquired a sufficient experiment, it adopted some number of legal instruments known as exempting regulations per category, which define the conditions in which the Member States can implement assistances without notifying them at the Commission. One can quote like examples the assistances with the formation, employment and SME. To guarantee the transparency, the Member States nevertheless are held to send a card of information to the Commission little time after the implementation of the assistance.

Article 88 states the fundamental procedure rules relating to the application of article 87, in particular the obligation for the Member States to notify at the Commission any project of granting of state aids and to put it at execution only after prior approval of the Commission.

Trusts: article 81 of treaty EC.

The agreements between companies which lead to an appreciable restriction of competition are prohibited. In fact, they are null full, so that the legal provision commun run according to which %u201Cthe agreements must be respected%u201D is not applicable. The European commission or an authority of national competition can order at the companies to put an end to such illegal agreements and to impose fines to them to have concluded them. That is also worth for the not written agreements and the concerted practices.

One can quote, as example, the agreements which consist with:
- to fix the purchase prices or of sale or other conditions trading;
- to limit the production, the outlets, the technical development or the investment;
- to distribute the markets or the sources of supply between competitors;
- to apply discriminatory conditions to the companies which did not leave to the agreement, in their inflicting of this fact a disadvantage in competition.

However, some restrictive agreements between companies are authorized because they are likely to encourage competition, for example by the promotion of technological advance or the improvement of the distribution. An agreement is authorized if the following cumulative conditions are met:
- the agreement contributes to improve the production or the distribution of the products or to promote technological advance or economic;
- the agreement holds to the consumers an equitable share profit which results from it;
- the restriction of competition is essential to the realization of the two preceding conditions;
- the agreement does not eliminate competition for a substantial part of the products or services in question.

On this basis, the Commission adopted payments known as of %u201Cexemption by category%u201D, which specify the conditions to which some categories of agreements must answer. The restrictive agreements which meet the conditions of an exempting regulation per category are authorized pursuant to article 81.

Dominant position abuses: article 82 of treaty EC.

This article, which prohibits the dominant position abuses, is applicable subject to the following conditions:
- the company occupies a dominant position, taking into account its market share and other factors, such as the presence or not of credible competitors and the fact that the company in question has or not of its own distribution network and an privileged access to the raw materials, as many factors which are likely to make it possible the aforementioned company to withdraw from the normal play competition;
- the company dominates the European market or a %u201Csubstantial part%u201D of this one;
- the company misuses its dominant position, for example as a practitioner of the prices too high to the damage of the consumers or the too low prices in order to exclude from the competitors of the market or to bar the access to new entrants of them, or by granting discriminatory advantages to customers.

The European commission or an authority of national competition can prohibit an abuse and impose a fine with very undertaken which is made guilty from there.

What are the Centers of Coordination? (Extracted from an investigation).

Centers of Coordination: legal tax avoidance in Belgium.

Almost unknown of the general public, the 250 centers of coordination present on the Belgian territory are the example even of a subject which divides the majority of the people who speak about it. These centers of coordination represent the purest legal tax avoidance and a system from protectionism which distorts world competition: purse, companies, etc.

Comment: It is initially necessary to try to define most precisely possible what is a center of coordination. In 1982, benefitting from first flown from the special capacities, the Martens-Gol government created the centers of coordination. Imagine an industry group or financier, and in this group, several companies which make production. These companies always have joint types of activity, like publicity, the accountancy or of the financial maltreatment. And well, the center of coordination will take care of these activities. According to Pierre Goblet, adviser with the cabinet of the Minister for Finance, Philippe Maystadt, the centers of coordination have three functions.

P.Gobelet: One can consider that they have three essential functions. The first function it is a function of general headquarter. I.e., a centralization of the activities which an international group undertakes. Second point, activities of financing, i.e., to have sufficient funds to allow the extension of a group. And the third activity is an activity of treasury. I.e. the companies of a group can have surpluses. One gathers on the level of the center of coordination all these surpluses so as to place them as well as possible interests of an international group.

Comment: The problem, if it is one, is that these centers of coordination profit from a particular tax mode: they are not imposed on their actual profits. Indeed, they have not the same tax rate as any other company, but the difference lies in the definition of the plate. One takes the whole of the expenses except the expenses financier and the personnel costs, and there one applies the tax rate. However, it is in these financial affairs that the centers of coordination make the most benefit.

But then what is thus the interest to have these centers of coordination on our territory if it is a dead loss for the public revenue? The deputy ecologist Jean-Pierre Viseur tries to find an answer.

J.P.Visor: The pretext was already then to create job. However, the centers of coordination did not create jobs since actually, they took again services which existed already in each company, therefore, it is not extra work which is created.
It is a tax gift which is made with the companies, and this tax gift was estimated, any deduction envisaged, between 35 and 40 billion per annum by the Council Finances itself. What wants to say that it is a completely official estimate from 35 to 40 billion.

Comment: One counted 13 centers of coordination in 1984. Today, they are 250. And for these companies which have a center of coordination; the decree Royal 187, which creates these centers, is obviously an aubaine. Rather than to see their taxed benefit, the companies thus may find it beneficial any to delocalize these benefit towards the centers of coordination of the group. Assessment: a fifth of the capital of the 160.000 Belgian companies is from now on localized in the centers of coordination. Multinationals like Alcatel, Caterpillar, stores GB, Volvo, Arcelor, Opel, Renault, have a center of coordination.

J.P Sight: But, that by this rationalization of work there is in the current location, considering the national debt, the very high income tax rate in Belgium, it should it be recognized, that there are companies which can gain billion and which these same companies are not precisely imposed as for very with each one is a shouting injustice. It is for that I oppose it. Tax incidences, but of the social incidences also, because one makes gleam the difficulties of a company to the personnel whereas the centers of coordination of this group of companies made of large defiscalized benefit.

From a legal point of view:

Since many years, the European commission seems to work in a discriminatory way with respect to Member States and this in spite of the judgments delivered by the European Court of Justice with respect to companies.
While referring to me with the various judgments delivered by the European Court of justice and with the decisions of the Commission, force is to note that the European commission distorts in a direct way the rules relating to competition.

Indeed, if Belgium, by the means of the centers of coordination, deprives itself of resources which turned over to it in the form of assistances by the Funds of a company European, it seems clear that the Commission contributes in a direct way to the disparities.

Obviously, one can only wonder about the legal nature of the decisions emanating, either of the European commission, or of the European Court of Justice: the position of Europe with regard to China.

In short, one can only wonder about the contribution of states - others that Belgium - to the budget of Europe, in particular on the level of the Funds of a company European (and of the structural assistances).

At the end of article 87 §1 of treaty EC, %u201Cexcept exemptions provided for in this treaty, are incompatible with the Common Market, insofar as they affect the exchanges between Member States, the assistances granted by the states or by means of resources of state in some form that it is which distorts or which threatens to distort competition by supporting some companies or unquestionable production%u201D.

Since this prohibition is not absolute as paragraphs 2 and 3 lay down it, it is advisable all the same to moderate the exceptions to this principle. Are thus compatible with the Common Market, the assistances intended to cure the damage caused by the natural disasters or other exceptional occurrences (article 87 §2 b).

In the same way can be regarded as compatible with the Common Market, the assistances intended to facilitate the development of activities or some economic areas, when they do not deteriorate the conditions of the exchanges in a contrary measurement with the shared interest (article 87 §3 c).
According to article 88 §3 of treaty EC, the Commission is in good time informed, to present its observations, of the projects tending to institute or modify assistances.

However, therefore, to appreciate the compatibility of a state aid, it falls on the Commission to put out of balance the beneficial effects of the assistance with its negative effects on the conditions of the exchanges and the maintenance of a distorted competition.

Within the framework of the Centers of Coordinations, the assistances in question not having any transitory effect, the effects on competition are permanent. It is besides the case of the assistances granted to Belgium, in particular with the Walloon region, and whose amounts and expiries are known and fixed by the European commission. Thus, the resources of Belgium and its areas are seen compensated by the European assistances up to 2013.

Insofar as an exemption is granted to a Member State, the European commission creates a distortion of competition between States if the latter compensates for the %u201Cfinancial resources of the state%u201D by assistances whose finalities would be illegitimate: Assistances of the Funds of European company.

- the Belgian state which gives up its resources sees these-last compensated by European assistances.

In short:
- The state aids (Centers of coordination) are permanent because there does not exist of expiry,
- They are selective (nearly 240 companies),
- Contrary to the jurisprudence of the CEJ, they are not subjected to refunding.
- the Belgian state which gives up its resources sees these-last compensated by European assistances.

In other words, the Commission finances Belgium and supports (directly), the competing inequalities. It is interesting to analyze the problem on the level of competition between companies, or departments:
- Example: R&D department of a company and other companies which are not able to face competition and to develop in order to increase. What undoubtedly, supports the trusts.
- The Member States which present budgetary problems see reprimands by the Commission and conversely, Belgium sees its resources compensated by assistances of Europe.
- On the level of the consumer, the resources of which deprives itself the government are compensated by other companies and the consumer.
- In the case of the centers of coordination, aids are selective and the Commission supports, in a direct way a restricted number of companies and shareholders (GM, Arcelor Mittal, Caterpillar, TNT, DHL, Pfizer, etc).

- If the European commission supports a restricted number of companies and shareholders, it is necessary all the same to acknowledge that the aforementioned Commission distorts the stockmarkets. On the other hand, the companies condemned on the basis of of a state aid, a trust or an dominant position abuse, see their braked development and the title to plunge. What, undoubtedly, penalizes the consumers and the shareholders.

Lately (11-13-2007), the European commission decided to grant one transitional period to Belgium, it is obvious that none the companies is held to refund the assistances and this, in accordance with the decisions of the European Court of Justice: %u201Cthe state is held to recover all aids%u2026%u201D

This week (july 2009), the Flemish government decided to grant a banking guarantee of an amount of 198 Million to the Volvo group of Ghent, and this, with a participation of 90% of the amount on behalf of the government.
By this mail, I allow myself to react about this illegal state aid granted by the Flemish government to the aforementioned company.
Since many years, a great number of companies which have a center of coordination - and it is the case of the Volvo group, enjoy many state aids.
As a consumer who, in a direct way, will be subjected to contribution, I think of having the right to dispute this illegal state aid. According to the legal texts, the state aid can't be cumulated and it is the case of the Volvo company which has its Center of coordination.
Moreover, the amount of the intervention of the public authorities cannot exceed the 50% of the entire amount of the granted assistance. In addition to the violation of jurisprudence (office plurality of state aid), to grant a state aid of 198 Million euros in the form of banking guarantee seems to me stripped of good sense: the consumer will have to refund this state aid. Personally, I believe that the banking guarantees do not have reason to exist.
The role of the European commission is to take care of the respect of the Community legislation and not to encourage the measures likely to involve an unfair competition. The crisis is the same one for everyone and it doesn't belong to us to encourage discriminations.
Lastly, whatever the nature of the state aid, the latter does not take place to be because the Volvo group has its center of coordination.

Indeed, by supporting a restricted group of companies (selective assistances or centers of coordination), the European commission allows some groups an expansion (Arcelor and its various acquisitions) while slowing down the growth of several companies (example: decision returned by the Commission against RYAN AIR).
The last elements show the hypocrisy of the European commission, which, decides against acquisition of groups by other companies, while closing the eyes on acquisition of companies by groups having a center of coordination (state aid):
- Belgacom has a center of coordination, misuses its dominant position already, has just acquired a Luxembourg operator and Scarlet, the Dutch operator.
- INBEV, whose assistances are not subjected to refunding (center of coordination) and whose expansion is supported by the Commission, multiplies acquisitions.
In addition to the decision returned by the European commission, dated November 13rd, 2007, the Commission all the same reinforced the hypocritical character which distinguishes it and this, by authorizing the tax incentives defined in the free zones of the Marshall plan - designed by the Walloon region.
Some groups supported by the centers of coordination - of which the Arcelor group - will continue to enjoy enormous assistances, and this, with the complicity of Europe.
Let us recall, that, in spite of the stop, from the companies having a center of coordination already receive new helps on behalf of the Belgian authorities and this, with the approval of the European commission: Volvo. Violation of the jurisprudence of the ECJ which wants that no new help is granted as much as the preceding assistance was not refunded.
It is not difficult besides to circumvent the European standards. The companies having a Center of Coordination, such Volvo Ghent, can cumulate assistances by the means of banking guarantees resulting from the Flemish government.

Contrary to the companies which received many state aid - the Centers of Coordination, these-last should not refund the state aid. That opposite, new helps are granted by the Belgian authorities in the form of guarantees banking.
On this subject, it is important to underline the lack of understanding of the European commission like this inadmissible partiality. The French farmers must refund assistances dating from the Eighties. However, the companies established in Belgium are not subjected to refunding, quite to the contrary.
Thus, the fines inflicted at the foreign companies reach records: Microsoft & Intel.

What can we say about American people who must constitute a pension, who invests its money in Microsoft actions or Intel out of purse and which sees the title plunging following a fine inflicted by the European commission ? What can we say about thousands of Chinese peasants who dream and invest out of purse ?

The dice is loaded.

I invite you to forgive my English.

Behnous Salah

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