AMD files antitrust case against Intel

[kabanero]

AMD files antitrust case against Intel.

SUNNYVALE, CA - June 28, 2005 - AMD (NYSE: AMD) announced today that it filed an antitrust complaint against Intel Corporation ("Intel") yesterday in U.S. 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. The 48-page complaint explains in detail how Intel has unlawfully maintained its monopoly in the x86 microprocessor market by engaging in worldwide coercion of customers from dealing with AMD. It identifies 38 companies that have been victims of coercion by Intel - including large scale computer-makers, small system-builders, wholesale distributors, and retailers, through seven types of illegality across three continents.

"Everywhere in the world, customers deserve freedom of choice and the benefits of innovation - and these are being stolen away in the microprocessor market," said Hector Ruiz, AMD chairman of the board, president and chief executive officer. "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(r), Solaris and Linux families of operating systems. Even Apple(r), a pioneer of the PC and one of the industry's enduring innovators, announced that it would switch exclusively to x86 processors to run Mac OS(r) software beginning in 2006. Intel's share of this critical market currently counts for about 80 percent of worldwide sales by unit volume and 90 percent by revenue, giving it entrenched monopoly ownership and super-dominant market power.

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.

"You don't have to take our word for it when it comes to Intel's abuses; the Japanese government condemned Intel for its exclusionary and illegal misconduct," said Thomas M. McCoy, AMD executive vice president, legal affairs and chief administrative officer. "We encourage regulators around the world to take a close look at the market failure and consumer harm Intel's business practices are causing in their nations. Intel maintains illegal monopoly profits at the expense of consumers and computer manufacturers, whose margins are razor thin. Now is the time for consumers and the industry worldwide to break free from the abusive Intel monopoly."

The 48-page complaint, drafted after an intensive investigation by AMD's lead outside counsel, Charles P. Diamond of O'Melveny & Myers LLP, details numerous examples of what Diamond describes as "a pervasive, global scheme to coerce Intel customers from freely dealing with AMD to the detriment of customers and consumers worldwide." 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;

*According to industry reports, and as confirmed by the JFTC in Japan, Intel has paid Dell and Toshiba huge sums not to do business with AMD.

*Intel paid Sony millions for exclusivity. AMD's share of Sony's business went from 23 percent in '02 to 8% in '03, to 0%, where it remains today.

*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;

*Intel paid NEC several million dollars for caps on NEC's purchases from AMD. Those caps assured Intel at least 90% of NEC's business in Japan and imposed a worldwide cap on the amount of AMD business NEC could do.

*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;

*When AMD succeeded in getting on the HP retail roadmap for mobile computers, and its products sold well, Intel responded by withholding HP's fourth quarter 2004 rebate check and refusing to waive HP's failure to achieve its targeted rebate goal; it allowed HP to make up the shortfall in succeeding quarters by promising Intel at least 90% of HP's mainstream retail business.

*Threatening retaliation against customers for introducing AMD computer platforms, particularly in strategic market segments such as commercial
desktop;

*Then-Compaq CEO Michael Capellas said in 2000 that because of the volume of business given to AMD, Intel withheld delivery of critical server chips. Saying "he had a gun to his head," he told AMD he had to stop buying.

*According to Gateway executives, their company has paid a high price for even its limited AMD dealings. They claim that Intel has "beaten them into 'guacamole'" in retaliation.

*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;

*AMD has been entirely shut out from Media Markt, Europe's largest computer retailer, which accounts for 35 percent of Germany's retail sales.

*Office Depot declined to stock AMD-powered notebooks regardless of the amount of financial support AMD offered, citing the risk of retaliation.

*Forcing PC makers and tech partners to boycott AMD product launches or promotions;

*Then-Intel CEO Craig Barrett threatened Acer's Chairman with "severe consequences" for supporting the AMD Athlon 64(tm) launch. This coincided with an unexplained delay by Intel in providing $15-20M in market development funds owed to Acer. Acer withdrew from the launch in September 2003.

*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.

*Intel denied AMD access to the highest level of membership for the Advanced DRAM technology consortium to limit AMD's participation in critical industry standard decisions that would affect its business.

*Intel designed its compilers, which translate software programs into machine-readable language, to degrade a program's performance if operated on a computer powered by an AMD microprocessor.

To view the full text of the complaint visit http://www.amd.com/breakfree

[BJ_M]

and the gloves come off ....... !!!

[BJ_M]

http://www.amd.com/us-en/assets/content_type/DownloadableAssets/AMD-Intel_Full_Complaint.pdf


full lawsuit in pdf format


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.

[absinthecarolinas]

Wow. It's about time.

-abs

[somebodeez]

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;

The Coca Cola and Pepsi companies pay restaurants, theme parks and even schools to exclusively offer only their products.
Isn't this the same thing

[pchan]

Oh.. oh.. history is repeating...

When Intel (almost went belly) clinched a deal with IBM to supply 8088 chip for the PC, they needed a second source partner becuase IBM sourcing didn't allow single source. Wintel boom ! IBM lost the PC market to the compatible... Intel got greedy and tried to snuff out AMD by cancelling the partnership and went to court on copyright infringement. It went nowhere and finally an agreement was strucked during the 486 time.

It cost an arm and a leg for a AM64 FX55 chip. Similar for Intel too... expensive chip. They should concentrate on making the PC chip cheaper instead of wasting time and money on lawyers.

[thecoalman]

The Coca Cola and Pepsi companies pay restaurants, theme parks and even schools to exclusively offer only their products.
Isn't this the same thing

I think where this diverges from that is in the fact that these companies don't necessarily want an exclusive deal. Such as :

*Then-Compaq CEO Michael Capellas said in 2000 that because of the volume of business given to AMD, Intel withheld delivery of critical server chips. Saying "he had a gun to his head," he told AMD he had to stop buying.

*According to Gateway executives, their company has paid a high price for even its limited AMD dealings. They claim that Intel has "beaten them into 'guacamole'" in retaliation.

*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;

Take for example the text in bold about Compaq, let's say you owned a chain of restaurants and Coca Cola held back shipments because you offered Peposi in a few of them. You'd have no choice but to dump the Pepsi if 90% of your business was going to suffer. If what is quoted is true, AFAIK that's illegal.

[RottenFoxBreath]

good,now maybe intel will have to spend some cash on lawyers instead of making more god awful shite tv ads.
pmsl. :P

[lordsmurf]

When your product sucks and nobody wants it, even when cheaper, lawsuits is all you have left apparently.

[nelson133]

Lord Smurf just can't help himself. Nyah Levi

[smearbrick1]

When your product sucks and nobody wants it, even when cheaper, lawsuits is all you have left apparently. :roll:

Well said.

[gf]

If Intel made good cpu's and innovative products, then they would not have to bully motherboard/computer companies to use them. But I guess they know their products are crap and want world dominance.

[lordsmurf]

The share is something like 80-20, 70-30, somewhere in there. AMD gloats it has "more bang for the buck" but it has some rather poor motherboard selections and a lot of their past processors self-melted. It's no shock they drag ass far behind Intel.

Whether or not Intel "strong arm" exists or not, a poorer AMD product will always be at the root of the matter.

Like I said, their only hope appears to be for them to sue their way into having more market share.

I would think that some of this is contractual and a far stretch on the part of AMD to claim otherwise. Like somebody else said, restaurants are allowed to do exclusive deals, much in the same way. It ensures their business to form partnerships for lengths of time. I can understand Intel not wanting to only sell when Compaq or Acer feels like buying (this is not a hagglers' market, nor should it be). Form a contract, and go from there. I'm under the impression that anti-trust is for UNREASONABLE actions, not standard contract stuff. I could be wrong, but under the same thinking, Coca-Cola "forcing" (or "bribing") schools into 5-year "Coke only" contracts would probably be just as illegal, and they're not.

[e404pnf]

Even if AMD are successful what do they hope to achieve? The same practices will continue but Intel will have to a little smarter.

I know it's not a like for like comparison (and I don't mean to go too far off topic) but when Micro$oft was prosecuted by the EU Commission for taking a monopoly by supplying Media Player with the OS the punishment was a €500m fine (about US$610m – ok a record fine but a drop in the Micro$oft ocean) and forced to sell Win XP without Media Player. So in the EU you could (for the exact same price as “regular” XP) buy MS Windows XP-N, with the N standing for Not-with-Media-Player. I say could buy it because shops don’t stock it and the Pre-Built market don’t supply it

So back to my original point (yes there was one)…what do AMD hope to achieve?

- e404pnf

[lordsmurf]

So back to my original point (yes there was one)…what do AMD hope to achieve? - e404pnf

I would guess headlines. "Don't forget poor abused us!"

[tonemgub]

All I know is that my 2.0 ghz chip outperforms intel chips that are up to 50% faster and 50% more expensive. AMD may have had its problems in the past, but that is the past. The future belongs to AMD.

[e404pnf]

So back to my original point (yes there was one)…what do AMD hope to achieve? - e404pnf

I would guess headlines. "Don't forget poor abused us!"

But for what this will cost them in legal fees surely there is a better way? I have only ever used AMD chips, so am not in a position to say which is the best but I do know (and this goes along with some of your comments) I would rather AMD developed their products and their own business strategy....just hope that this little adventure of theirs is successful sooner rather than later so that they can go back to making better processors.

- e404pnf

[samuraijack]

I think this is a good thing. Im not going to take sides on which chip is best because thats all about personal preference. The thing we need to keep in mind is that without healthy competition, the chip market slows down and we get stuck with inferior product.

No competition=no incentive to make better product

So its not about what chip you like, its about keeping the competition alive, so we (the consumer) win in the end.

Technological Darwinism works for me

[smearbrick1]

So back to my original point (yes there was one)…what do AMD hope to achieve? - e404pnf

I would guess headlines. "Don't forget poor abused us!"

But for what this will cost them in legal fees surely there is a better way? I have only ever used AMD chips, so am not in a position to say which is the best but I do know (and this goes along with some of your comments) I would rather AMD developed their products and their own business strategy....just hope that this little adventure of theirs is successful sooner rather than later so that they can go back to making better processors.

- e404pnf

Just seems AMD is pissed that have such a small market share. It's understandable. On the other hand, there is something to be said for the underdog. I realize, at the end of the day, this doesn't make AMD any more money.

Regardless of what type of reliability the AMD people have attained, they kind of screwed themselves in the past with poor chip performance. I think this, coupled with brand name recognition, may be the reason AMD doesn't sell as well as Intel. As far as contractual obligations and strong arm tactics... wouldn't you think the Intel buyers (the large computer manufacturers) should be the ones filing suit, not a direct competitor?

[thecoalman]

I could be wrong, but under the same thinking, Coca-Cola "forcing" (or "bribing") schools into 5-year "Coke only" contracts would probably be just as illegal, and they're not.

I think that's the gist of it, the analogy would be that you have 10 schools and in two of them your selling Pepsi. Coke withholds it's product because they know you can't sell pepsi in the 8 schools set up for selling the Coke product. Therefore a significant amount of your business is going to suffer essentially forcing you to drop the other product.

[disturbed1]

From what I understand, HP, Dell .... etc don't want AMD because they were/are not able to supply enough chips to meet demand. This forces the OEMs to buy in smaller qtys, driving up prices on the chips with less money to go in the pocket. Intel offers huge discount for large volume OEMs.

I think AMD makes a decent chip for the money, VIA just makes poor motherboard chipsets.

AMD has always been an underdog, and gains it's fans from "elite" computer builders. This was mainly brought on by the overclocking ability of the chip, and the fact that it is cheaper in single piece qtys.

If Intel is indeed limiting competition by denying sales to OEMs that also use AMD chips, then yes they should be fined. But this will gain AMD nothing, cause AMD is still unable to match volume nor the volume discounts Intel offers.

If I have a choice between an AMD 64 3200+ vs an Intel 3.2GHz with all other specs the same and a price difference of +/- $50, I'm choosing the Intel. If they was a +/- $200 difference, then I'd get the Intel. But AMD OEM systems just don't offer the deep discounts.

[dphirschler]

Like I said, their only hope appears to be for them to sue their way into having more market share.

Looks to me like all AMD wants is a fair shake at it. If the public chooses Intel over AMD then, then AMD has nothing to complain about and can only strive to improve their product. But if they are blocked from even getting a fair chance, then they don't stand a chance. And we all suffer, not just AMD.


Darryl

[somebodeez]

The Coca Cola and Pepsi companies pay restaurants, theme parks and even schools to exclusively offer only their products.
Isn't this the same thing

I think where this diverges from that is in the fact that these companies don't necessarily want an exclusive deal. Such as :

*Then-Compaq CEO Michael Capellas said in 2000 that because of the volume of business given to AMD, Intel withheld delivery of critical server chips. Saying "he had a gun to his head," he told AMD he had to stop buying.

*According to Gateway executives, their company has paid a high price for even its limited AMD dealings. They claim that Intel has "beaten them into 'guacamole'" in retaliation.

*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;

Take for example the text in bold about Compaq, let's say you owned a chain of restaurants and Coca Cola held back shipments because you offered Peposi in a few of them. You'd have no choice but to dump the Pepsi if 90% of your business was going to suffer. If what is quoted is true, AFAIK that's illegal.

I'm a little confused. The soda companies *do* want exclusive deals, give monetary bonuses for exclusive deals and they have them.
When we go to Denny's, it's Coke branded soft drinks only. Same thing at Six Flags. When we go to the Steakhouse, it's Pepsi only products and so on.

I don't know what most of those companies receive but I can tell you a local high school received something along the lines of $79,000 in exchange for agreeing to sell Coke products exclusively. I believe the agreement was for like 3 or 4 years.

As customers, we have no choice while patronizing those establishments between Coke or Pepsi products except to go elsewhere if it was really that big of a deal to us (which it's not for us even though Pepsi's better :P ) or as students or parents attending school events, we're stuck.

[lordsmurf]

As far as contractual obligations and strong arm tactics... wouldn't you think the Intel buyers (the large computer manufacturers) should be the ones filing suit, not a direct competitor?

That's what I thought too.

[thecoalman]

I'm a little confused. The soda companies *do* want exclusive deals, give monetary bonuses for exclusive deals and they have them.
When we go to Denny's, it's Coke branded soft drinks only. Same thing at Six Flags. When we go to the Steakhouse, it's Pepsi only products and so on.

As customers, we have no choice while patronizing those establishments between Coke or Pepsi products except to go elsewhere if it was really that big of a deal to us. (which it's not for us even though Pepsi's better :P )

Absolutely correct and there's nothing wrong with that, both agree to the arrangement but that's not the situation here if the article is correct because the exclusive arrangement is being rammed down the vendors throat.

It's not "if you use our chips we'll give you a great deal" but "if you don't use our chips we're going to put you out of business."

[somebodeez]

Absolutely correct and there's nothing wrong with that, both agree to the arrangement but that's not the situation here if the article is correct because the exclusive arrangement is being rammed down the vendors throat.

It's not "if you use our chips we'll give you a great deal" but "if you don't use our chips we're going to put you out of business."

AhHa! I get it now, thanks

[pchan]

With the current crop of AM64 FX55 or 57, the performance is comparable to Intel top cpu. But, the higher end cpu are still very expensive for both Intel and AMD. I have both AMD and Intel PC, with the exception video encoding in Intel's favor, there rest are comparable.

We need both Intel and AMD to give value for money cpu and to keep innovate. Without AMD charging ahead with 64bits, Intel will still be saying 32bits is enough.

The lawsuit is not giong change thing much except making some lawyers rich.

[SCDVD]

The share is something like 80-20, 70-30, somewhere in there. AMD gloats it has "more bang for the buck" but it has some rather poor motherboard selections and a lot of their past processors self-melted. It's no shock they drag ass far behind Intel.

Whether or not Intel "strong arm" exists or not, a poorer AMD product will always be at the root of the matter.

Like I said, their only hope appears to be for them to sue their way into having more market share.

I would think that some of this is contractual and a far stretch on the part of AMD to claim otherwise. Like somebody else said, restaurants are allowed to do exclusive deals, much in the same way. It ensures their business to form partnerships for lengths of time. I can understand Intel not wanting to only sell when Compaq or Acer feels like buying (this is not a hagglers' market, nor should it be). Form a contract, and go from there. I'm under the impression that anti-trust is for UNREASONABLE actions, not standard contract stuff. I could be wrong, but under the same thinking, Coca-Cola "forcing" (or "bribing") schools into 5-year "Coke only" contracts would probably be just as illegal, and they're not.

I wholeheartedly agree with this perspective. One thing to also consider is that when the computer manufacturer needs something (faster, better, lower cost per unit etc.), the chip maker must make a heavy R&D investment to develop the new product. It is reasonable to have a contract that has obligations that BOTH parties agree to. So, in this case, AMD doesn't like this and tries to sue it's way through it. My advice to AMD is simple - Build a better product and then sign your own contact! The consumer benefits from the competition. If it were not for competition, today's processors would be 1/10th the speed and ten times the price.

I hope this thread doesn't degrade into - "My daddy drove Fords, so that makes Fords better." crap. This thread is about the business side of the issues, not a discussion of Winstones, Fremoflapits, Doodoobits et al. If you want to discuss how fast your daddy's Ford is, please do so somewhere else

[SCDVD]

[quote="somebodeez"]

The Coca Cola and Pepsi companies pay restaurants, theme parks and even schools to exclusively offer only their products.
Isn't this the same thing

I don't know what most of those companies receive but I can tell you a local high school received something along the lines of $79,000 in exchange for agreeing to sell Coke products exclusively. I believe the agreement was for like 3 or 4 years.

As customers, we have no choice while patronizing those establishments between Coke or Pepsi products except to go elsewhere if it was really that big of a deal to us (which it's not for us even though Pepsi's better :P ) or as students or parents attending school events, we're stuck.

There is one not so small detail - $79,000! There are some that think it is perfectly fine to collect the $79,000 and then immediately cry about how unfair this "monopoly" is. In this case the school derived a significant benefit - $79,000 to be exact. The time for competition is BEFORE the deal. Don't whine about it after. In this case, Pepsi could have offered more money and a shorter contract period for example. Businesses invest money to get a return on it. It isn't altruism. What small minded consumer doesn't realize that they benefit a great deal from the competition? If it weren't for competition, does anyone think that the school would have received $79,000!? If Coke didn't have any competition, how much do you think a Coke would cost, and how do think it would taste?

[somebodeez]

What small minded consumer doesn't realize that they benefit a great deal from the competition? If it weren't for competition, does anyone think that the school would have received $79,000!? If Coke didn't have any competition, how much do you think a Coke would cost, and how do think it would taste?

Oh I agree - competition is wonderful! We need more!

I just couldn't figure out how the soda companies paying $ for exclusive sales was any different than the AMD - Intel thing.