The large fine levied on Intel by the EU for supposedly antitrust actions, coupled with the announcement that Obama administration foolishly intends to dust off the United State’s antitrust guns, begs a number of questions. For the moment, though, I’m only interested in two: where is this fine money supposed to be going? how much of it actually ends up there?
Naturally, like all fines from regulators or courts, actual payment will be mired by years of legislative wrangling and will probably end up being settled for some smaller number. But, according to Silicon Valley Mercury News, the EUR 1.06 billion fine “will have to be put into a bank account by Intel within the next three months and left there pending the outcome of its appeals.” A legal news site indicates, however, that “it was not reported who would control the bank account—Intel, or the European Commission. Nor was there any word as to who would own the interest earned from such a large sum of money sitting in an interest-bearing account.” It also doesn’t seem to be specified if there are any limits on which banks can be used. Can this be a US bank, for example, or does it need to be in the EU? Europe being Europe, I’m assuming that they will demand that the money be kept in a European bank.
Does Intel have to pay the fine immediately?
The fine must be paid within three months of the date of notification of the Decision.
Where does the money go?
Once final judgment has been delivered in any appeals before the Court of First Instance (CFI) and the Court of Justice, the money goes into the EU’s central budget, thus reducing the contributions that Member States pay to the EU.
Does Intel have to pay the fine if it appeals to the European Court of First Instance (CFI)?
Yes. In case of appeals to the CFI, it is normal practice that the fine is paid into a blocked bank account pending the final outcome of the appeals process. Any fine that is provisionally paid will produce interest based on the interest rate applied by the European Central Bank to its main refinancing operations. In exceptional circumstances, companies may be allowed to cover the amount of the fine by a bank guarantee at a higher interest rate.
What percentage of Intel’s turnover does the fine represent?
The fine represents 4.15 % of Intel’s turnover in 2008. This is less than half the allowable maximum, which is 10% of a company’s annual turnover.
This last bit means that the European Commission could have made this fine as high as EUR 2.55 billion, but somehow concluded that 1.06 billion was the proper amount for this offense.
So, what you have in this case is over a billion euro from an American company deposited into (probably) a European bank, but locked there until the appeals process is over. (Hey, what a coincidence! Just when European banks badly need large deposits that are unlikely to be withdrawn.) The interest seems to just accumulate there for the interim. Once the appeal is sorted out, it’s likely that at least some of the money in this account will be inserted into the European Union’s central budget, possibly with interest. Since this is a central fund, and not earmarked for anything specific, the EU can then use this money pretty much any way it likes. Here’s how they spent it last year:
I can’t find a good source of information about what percentage of fines like these eventually get paid in reality, or how much grift there might be in the system. I’d love to hear about both.