The European Commission has accused Intel of abusing its dominant position in the market to damage the business of its main rival Advanced Micro Devices (AMD).

After seven years of investigation, the commission said yesterday it believed Intel had engaged in below-cost selling, offered unfair rebates to customers and provided illegal payments to firms to delay or cancel products using AMD chips.

The conduct was part of an "overall anti-competitive strategy", said the EU executive, which has threatened to impose fines and force Intel to cease its abuses.

"The rebates offered by Intel were of such a quantity and such an amount that an efficient competitor would be forced to price below cost," said a commission spokesman. "We think that would be bad for competition and bad for consumers."

Intel, one of Ireland's biggest multinational employers with 5,500 staff, denied the charges and said the chip industry remained "fiercely competitive".

"We are confident that the microprocessor market segment is functioning normally and that Intel's conduct has been lawful, pro-competitive, and beneficial to consumers," said Bruce Sewell, a senior Intel vice-president and general counsel. A statement of objections based on the preliminary conclusions of an investigation into Intel's business practices by the commission was sent to the firm late Thursday.

It alleges Intel provided substantial rebates to computer manufacturers conditional on them using Intel chips for all or the vast majority of their needs. It says Intel made payments to computer manufacturers to induce them to delay or cancel the launch of a product line incorporating AMD chips. Intel also offered chips at below cost price to strategic customers in the server sector. Intel has 10 weeks to respond to the commission and could face a fine worth 10 per cent of its annual turnover, which was $35.4 billion in 2006, if the findings are upheld.

A commission official said yesterday the period of abuse began in 2003 and lasted for about three years. The commission would not comment about whether the unfair practices are ongoing. Much of the evidence gathered by the commission was obtained following raids on Intel and computer manufacturers' offices throughout Europe in July 2005.

AMD also provided extensive information about Intel's business practices since it first filed a complaint in October 2000.

In a statement, AMD said the EU action suggested that Intel had, once again, been unable to justify its illegal conduct. "Consumers know today that their welfare has been sacrificed in the illegal interest of preserving monopoly profits," it said.

Research from the consultancy Mercury Research shows that AMD's market share was about 19 per cent by March 2007, down from 25 per cent late last year.

The commission's powers to pursue monopolists faces a crucial test in September when the European Court of First Instance will rule on an appeal by Microsoft against a 2004 decision by the commission finding it violated antitrust laws. This case could have implications for the anti-trust case against Intel.