Intel Facing Antitrust Suit

by Glen Shapiro, LawAndTax-News.com, New York

30 June 2005

California-based chip maker, Advanced Micro Devices Inc. announced on Monday that it has filed an antitrust complaint against Intel Corporation in the US federal district court for the district of Delaware under Section 2 of the Sherman Antitrust Act, Sections 4 and 16 of the Clayton Act, and the California Business and Professions Code.

In its 48-page complaint, AMD alleges that Intel has unlawfully maintained its monopoly in the x86 microprocessor market by engaging in worldwide coercion of customers from dealing with AMD.

The smaller firm stated that 38 companies have been victims of coercion by Intel – including large scale computer-makers, small system-builders, wholesale distributors, and retailers.

“Everywhere in the world, customers deserve freedom of choice and the benefits of innovation – and these are being stolen away in the microprocessor market,” Hector Ruiz, AMD chairman of the board, president and chief executive officer argued, continuing:

“Whether through higher prices from monopoly profits, fewer choices in the marketplace or barriers to innovation – people from Osaka to Frankfurt to Chicago pay the price in cash every day for Intel’s monopoly abuses.”

X86 microprocessors run the Microsoft Windows, Solaris and Linux families of operating systems, and Apple has also announced that it will switch exclusively to x86 processors to run Mac OS software beginning from 2006. Intel’s share of this critical market currently counts for about 80% of worldwide sales by unit volume and 90% by revenue, giving it entrenched monopoly ownership and super-dominant market power.

According to AMD:

"This litigation follows a recent ruling from the Fair Trade Commission of Japan (JFTC), which found that Intel abused its monopoly power to exclude fair and open competition, violating Section 3 of Japan’s Antimonopoly Act. These findings reveal that Intel deliberately engaged in illegal business practices to stop AMD’s increasing market share by imposing limitations on Japanese PC manufacturers. Intel did not contest these charges. The European Commission has stated that it is pursuing an investigation against Intel for similar possible antitrust violations and is cooperating with the Japanese authorities."

According to the complaint, Intel has unlawfully maintained its monopoly by, among other things:

• Forcing major customers such as Dell, Sony, Toshiba, Gateway, and Hitachi into Intel-exclusive deals in return for outright cash payments, discriminatory pricing or marketing subsidies conditioned on the exclusion of AMD;
• Forcing other major customers such as NEC, Acer, and Fujitsu into partial exclusivity agreements by conditioning rebates, allowances and market development funds (MDF) on customers’ agreement to severely limit or forego entirely purchases from AMD;
• Establishing a system of discriminatory and retroactive incentives triggered by purchases at such high levels as to have the intended effect of denying customers the freedom to purchase any significant volume of processors from AMD;
• Threatening retaliation against customers for introducing AMD computer platforms, particularly in strategic market segments such as commercial desktop;
• Establishing and enforcing quotas among key retailers such as Best Buy and Circuit City, effectively requiring them to stock overwhelmingly or exclusively, Intel computers, artificially limiting consumer choice;
• Forcing PC makers and tech partners to boycott AMD product launches or promotions; and
• Abusing its market power by forcing on the industry technical standards and products that have as their main purpose the handicapping of AMD in the marketplace.

Speaking to the US media following the filing of the complaint, Intel spokesman, Tom Beerman responded by announcing that:

"Intel believes in competing fairly and believes consumers are benefiting from this vigorous competition. AMD has chosen, once again, to complain to a court about Intel's success, with a legal case full of excuses and speculation."

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