Competition Commissioner Neelie Kroes said that the antitrust action is primarily designed to protect consumers. “Intel has harmed millions of EU consumers,” she said, adding that the large fine meted out should “therefore come as no surprise”.

The main antitrust abuses involved paying rebates to system manufacturers and to Europe’s largest IT retailer, Media Markt, in order to shut out Intel’s closest rival, AMD. Although the rebates resulted in a reduction in retail prices, Kroes said that the harm to consumers stems from their not getting the choice of computers that they would have if AMD wasn’t suppressed.

The Commission will monitor Intel’s compliance with the ruling. Unlike in the Microsoft case, where it appointed a monitoring trustee, the Commission will do the job itself, said officials in the antitrust group.

Intel plans to appeal the ruling and takes “strong exception” to the Commission’s decision, Intel President and CEO Paul Otellini said in a statement, saying the decision is “wrong and ignores the reality of a highly competitive microprocessor market.”

“There has been absolutely zero harm to consumers,” Otellini said.

The $1.44 billion fine is the largest antitrust penalty the Commission has ever levied against a single company. The size of the fine was calculated taking into consideration the duration of the antitrust abuse, the severity of the actions, and any mitigating circumstances the company could offer. Antitrust officials said that there were no mitigating circumstances in this case.

The fine dwarfs that against Microsoft which was fined $723 million for abusing its dominant position in the software market, plus an additional $1.3 billion for failing to respect the antitrust ruling.

The Commission investigation centered around charges that Intel illegally gave rebates to computer manufacturers in return for them buying the bulk of their x86 microprocessors from Intel.

The company was also accused of paying computer makers to cancel or delay the launch of machines using chips made by rival, AMD, and of selling its chips for server computers at below cost to large customers such as governments and universities.

Last year the Commission added fresh charges, accusing the chip giant of paying generous rebates to Media Markt, Europe’s biggest chain of IT stores, in return for it de-listing all computers containing AMD chips.

Intel dominates the personal-computer chip market with share estimated at 81.9 percent at the end of 2008, while AMD held 17.7 percent, according to IDC.

Europe isn’t the only region where Intel has run into trouble with antitrust authorities. In 2005 the company settled with Japan’s competition office. Last year it was fined nearly $20 million in South Korea. Meanwhile, the company is under investigation in the U.S. by the Federal Trade Commission.

“There were a number of documents from OEMs or between Intel and OEMs that refute what was claimed here,” said Otellini during a hastily called teleconference with the news media after the EC’s massive fine was announced this morning.

OEMs (original equipment manufacturers) are PC makers that are Intel’s primary customers for processors. The EC ruled that Intel paid rebates to OEMs and to Europe’s largest IT retailer, Media Markt, in a way that shut out Intel’s closest rival, Advanced Micro Devices Inc., which brought the complaint to the European Union. The EC is the executive arm of the 27-member-state European Union.

Although the rebates resulted in a reduction in retail prices, Competition Commissioner Neelie Kroes said that the harm to consumers stems from their not getting the choice of computers that they would have if AMD hadn’t been suppressed.

“Intel has harmed millions of EU consumers,” Kroes said earlier today, adding that the large fine should “therefore come as no surprise.”

Otellini “strongly disagrees” with the EC’s ruling.

“There is no evidence of consumer harm or competitor harm,” he said. “It’s just a matter of competition at work, which is something we all want to see, versus something nefarious.”

Otellini said Intel “has the right to do this” and that it causes “no harm and no foul.”

Otellini disputed one of the EU’s key allegations, that Intel paid “conditional” rebates to PC makers that unfairly locked out chip competitors.

The EC “alleged exclusive deals but couldn’t find them, so it said we must have hidden [the evidence],” he said. But the EC “got all of the documents that they wanted … so I’m really baffled.”

Otellini declined to release these documents, which include contracts with OEMs, citing a protective order in the U.S. case in Delaware. That order, according to Intel spokesman Chuck Mulloy, was agreed upon by Intel, AMD and the PC makers.

In those contracts, “there is no condition” demanding that OEMs buy exclusively from Intel, Otellini said.

Intel’s contracts with customers are “straightforward” and based primarily on volume. “The more you buy, the less you pay,” he said.

Otellini, who had only seen a three-page summary of the EC ruling, not the full 500-page document, said Intel plans to abide by the ruling even as it appeals it. The company has no plans to change its business practices.

Otellini pointed out that as far as he knew, no PC makers had joined the AMD complaint, which was raised nearly a decade ago. Thus, it was “absurd” to suggest that PC makers were disgruntled, or that Intel held any monopolistic sway over them.

“In most cases, our customers are larger than Intel. They have more buying power and are incredible negotiators,” Otellini said. “So on the face of it, the scenario is absurd.”

Despite the ruling, Intel has no plans to change its investment in Europe, Otellini said. Intel employs 6,000 workers in the EU countries, mostly in Ireland, where it has large chip plants.

Otellini took umbrage at Kroes’ tone when the fine was announced.

“I saw her remarks and they sounded like a joke. This is not a joking matter,” he said.