Intel was found guilty of giving rebates to computer manufacturers on condition that they bought all, or almost all, of their x86 chips from Intel, rather than chips offered by competitors such as AMD.
The x86 chips are a key hardware component of every computer, and Intel holds at least 70 per cent of the market, according to the EC.
Intel was also charged with paying computer manufacturers, including Acer, Dell, HP, Lenovo and NEC, to delay products that contained AMD's x86 chips, and to limit the sales channels available to these products.
"Intel has harmed millions of European consumers by deliberately acting to keep competitors out of the market for computer chips for many years. Such a serious and sustained violation of the EU's anti-trust rules cannot be tolerated," said EU competition commissioner Neelie Kroes.
Intel chief executive Paul Otellini said in a statement that the company will appeal against the verdict because "the decision is wrong " and Intel's own evidence had not been properly examined. He argued that the EC had ignored the reality of a highly competitive microprocessor market.
"The natural result of a competitive market with only two major suppliers is that, when one company wins sales, the other does not," he said.
Intel was found guilty of abusing EC Treaty anti-trust rule Article 82, which relates to companies that hold dominant market positions.
The fine was calculated on the basis of the value of Intel's x86 CPU sales in the European Economic Area and the duration of the infringement, which was found to be just over five years.
The fine tops the $1.6bn (£1bn) levied against Microsoft for anti-trust offences five years ago. However, the EC could have fined Intel as much as 10 per cent of its annual revenue, which would have been about £2.5bn.
Otellini said that, as the company begins its appeal process, it would work with the EC to ensure compliance with its decision, which was the end result of a complaint filed by AMD to the European Union in 2007.
"The decision finds that Intel's practices did not constitute competition on the merits of the respective Intel and AMD products, but rather were part of a strategy designed to exploit Intel's existing entrenched position in the market, " said a report published by the EC today.
In response, Bruce Sewell, Intel's senior vice president and general counsel, said: "The basic allegation against Intel is that it used lower prices, in the form of rebates, to prevent customers from buying or supporting AMD, or to punish customers when they did so.
"Such claims are false. Intel has never required a customer to agree not to buy from AMD in order to obtain a discount, nor raised a customer's prices when it decided to buy from AMD.
"Intel believes that consumers benefit from lower prices. Regulations should not prevent one company, no matter how large that company is, from offering discounts or providing incentives."
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