EU to drop complaint against Intel

David Lawsky

BRUSSELS: The European Commission plans to drop its antitrust investigation

of chipmaker Intel Corp., a source said on Monday, marking the second time in

recent days that European regulators have backed US technology companies.

"The European Commission will soon drop its investigation against Intel

Corp.," the source told Reuters. The comment followed similar remarks by

European Competition Commissioner Mario Monti reported from New York over the

weekend.

News of the coming Intel ruling follows hard on the heels of a decision by

the Commission last week to give Hewlett Packard Co. early and unconditional

clearance of its proposed $22.3 billion purchase of Compaq Computer Corp.

In the case of Intel, the Commission will formally decide to reject

complaints alleging that Intel has abused its dominant position in

Windows-compatible microprocessors, the source said. Both chipset maker VIA

Technologies and Advanced Micro Devices, Intel's principal rival in the market

for microprocessors, had filed complaints against Intel in September and October

2000, respectively.

Intel spokesman Chuck Mulloy said VIA dropped its complaint several weeks

ago, but the Santa Clara, California-based company has not yet received official

word from the Commission. "We have not received any formal notification

from the staff at the Commission regarding any formal actions on these two

inquiries," Mulloy said.

"We're gratified that the EC's competition directorate has determined

that charges by our competitors are unfounded," Mulloy later. "Our

business practices are both fair and lawful and we're gratified that the

Commission came to this determination after it conducted a thorough 15-month

investigation."

VIA could not immediately be reached for comment.

The source said the Commission has already ceased an investigation into abuse

of Intel dominance in "chipsets," used to help the microprocessor

communicate with other parts of the machine, after a firm withdrew its

complaints. The source did not identify the firm.

Monti said in New York over the weekend that he had uncovered no evidence to

support claims by unidentified rivals concerning the abuse of Intel's dominant

position in microprocessors, the Financial Times reported. An EU source

confirmed the comments on Monday.

Monti appeared with Charles James, who heads the Justice Department antitrust

division, at a breakfast meeting in New York on Monday. Monti praised the Bush

administration for its willingness to look into international coordination of

antitrust laws.

"One area we have distinctly seen more agreement with the Bush

administration than the Clinton administration is the notion of having an

agreement on core competition law," he said. "It is something that I

think CEOs around the world should look to with hope."

The relationship between Monti and James got off to a rough start in July

when the Commission rejected General Electric's proposed acquisition of

Honeywell International. James, who was appointed by President George W. Bush,

succeeded Democrats with whom Monti had had an excellent working relationship.

James criticized the GE decision and said the Commission tended to give too

much credibility to rivals. Since then, Monti has gone out of his way to

emphasize his willingness to be fair to US corporations. But there are limits,

an expert said on Monday.

"Mario Monti is a man of principle who would not be waving problems

through simply to avoid transatlantic tensions," said Alex Burnside, a

competition lawyer with Linklaters and Alliance. "But so far as there is

scope, I'm sure the Commission will be looking to avoid conflict with the

US"

Microsoft on the hook



But no one is saying that the biggest high-tech firm still facing an
investigation from the Commission, Microsoft Corp., is off the hook.

Asked if the decisions of the past week augured well for Microsoft, a

competition expert in Brussels who asked not to be identified said: "No, I

don't think so." Microsoft faces an investigation into allegations that it

rigged its Windows operating system to give it an edge over competitors. No time

is set for an end to that investigation.

US courts have found that Microsoft competed unfairly in the United States,

based on a different set of facts. The Justice Department and nine states are

split over what remedy is appropriate for the violation. The states contend that

the Justice Department proposals are not stringent enough to prevent further

violations.

So far, Monti has declined to talk much about his Microsoft investigation.

Instead, he has emphasized his current rulings over the past few days. The HP

decision has provided a selling point for international cooperation in a series

of media and personal appearances at the World Economic Forum in New York.

At the time of the Commission decision on GE, some commentators said it could

discourage companies from bringing new deals to the Commission for approval. In

recent months proposed mergers have in fact slowed down along with the economy.

But GE itself, for one, has not been discouraged from bringing new transactions

to the Commission.

Jeffrey Immelt, GE's new chief executive officer, said in an interview with

Reuters last week that his firm sees "real, strong growth prospects in

Europe." He said that since GE-Honeywell the Commission has already

approved one other acquisition by GE and he looks forward to others in Europe.

(Additional reporting by Tom Johnson in New York, additional reporting by

Duncan Martell in San Francisco)

(C) Reuters Limited.