South Korea Says Intel Abused Dominant Position

South Korean regulators said on Thursday Intel had abused its dominant position in the local market and ordered the world's top semiconductor maker to pay a fine of about $26 million.

The ruling, which follows a three-year probe, is being closely watched as similar antitrust investigations are underway in the United States and in Europe.

Intel's chief lawyer said the company would almost certainly file an appeal.  "We are disappointed by the decision and we think the KFTC (Korea Fair Trade Commission) has either misunderstood or just possibly chosen to ignore a great deal of the evidence that contradicts its findings," Bruce Sewell, Intel's general counsel, told Reuters by telephone.

Because the KFTC defined the issue as a purely Korean one, the ruling "will have very little impact outside of Korea," Sewell added.

The KFTC said in a statement Intel offered rebates to South Korean PC makers including Samsung Electronics and Trigem Computer between 2002 and 2005 in return for not buying microprocessors from rival Advanced Micro Devices .

Intel and AMD make the central processing unit (CPU) chips at the heart of the world's personal computers and servers.

The KFTC ordered Intel to stop offering the rebates and pay a fine of about 26 billion won (US$25.57 million), after confirmation of revenue made by Intel as a result of the practice. 

"Intel's rebates were paid in return for not using its rivals' products and (this) has hurt market competition by limiting the choice of local PC makers in selecting business partners," KTFC said.

"Taking into account Intel's rebates, AMD could not possibly fight Intel even if its chips were offered for free. South Korean consumers had to buy PCs at higher prices as domestic PC makers were forced to buy Intel's pricier CPU."

In the United States, the state of New York launched a formal probe into Intel in January, but federal antitrust enforcers in Washington have so far declined to take up the matter. 

In Brussels, the European Commission charged Intel last July with selling chips below cost and offering customers huge rebates in an illegal attempt to drive the smaller AMD out of the market.

In Japan, the Fair Trade Commission concluded in 2005 that Intel violated that country's Antimonopoly Act. Intel disagreed with the findings but accepted the commission's recommendation, a move that allowed it to avoid a trial. 

In 2005, the KFTC fined Microsoft $34 million, saying the world's biggest software company breached anti-trust laws by selling a version of its Windows operating system that incorporated its media player and instant messaging services.   

Microsoft later released new versions of Windows in the South Korean market to comply with the ruling.

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