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AMD Faces Long And Bumpy Road In Intel Antitrust Suit

Jun 28, 2005 (12:06 PM EDT)

Read the Original Article at http://www.informationweek.com/news/showArticle.jhtml?articleID=164903713


MANHASSET, N.Y. — Intel Corp. has responded to rival microprocessor supplier Advanced Micro Device Inc.'s antitrust suit by defending its business practices, paving the way for a protracted court battle some industry observers feel could go AMD's way.

In the antitrust suit filed in the U.S. District Court in Delaware Monday, AMD (Sunnyvale, Calif.) alleges that Intel (Santa Clara, Calif.) has been operating an unlawful monopoly in the x86 microprocessor market and has coerced computer makers, distributors, small system builders and retailers in their dealings with AMD.

In a released statement Tuesday evening, Intel said "We strongly disagree with AMD's complaints about the business practices of Intel and Intel's customers. Intel believes in competing fairly and believes consumers are benefiting from this vigorous competition. Intel will respond appropriately to AMD's latest complaints and is committed to successfully resolving these issues in court."

According to ThinkEquity (San Francisco, Calif.) analyst Eric Ross, Intel "has (maybe) 80 percent of the microprocessor market, and 60 percent of the chipset market," which he believes constitutes market dominance but not quite monopolistic practices. And using a monopoly such as Microsoft as an example, he believes knocking Intel off its high perch would be difficult.

"Microsoft dominates the operating system market, and they're still a monopoly," he added, noting court challenges to that company's control of the operating system software market.

Ross said that proving Intel's aggressive marketing practices are illegal, as stated in the antitrust suit, would be difficult.

"Aggressive doesn't mean illegal," said Ross. "The suit goes after the idea of paying for exclusivity to enhance marketing revenue. That is not illegal."

Ross added, "These things have been going on in the channel for ten years. Intel would have to show near-racketeering levels. I don't see how what they do is different from what IBM and Dell does in their respective channels."

But other industry observers suggest that the increasing scrutinization of Intel's practices should make the company nervous as the antitrust suit moves through the courts.

"Recent antitrust decisions have made it clear that a monopolists' conduct receives special scrutiny under the law," said David Balto, a Washington-based attorney and former policy director at the Federal Trade Commission The courts will look very critically (at) whether Intel has a legitimate business purpose and whether consumers are really better off from Intel's practices."

A Forbes online report quoted Wells Fargo Securities stating that there is "a high degree of likelihood" Intel would be found guilty "based not only on our reading of the complaint, but also on Intel's agreement this Spring to proceedings in Japan that alleged many of the same actions as well as AMD's previous victory in a protracted legal procedure against Intel regarding access to intellectual property."

On March 31, Intel accepted a recommendation from the Japan Fair Trade Commission (JFTC) to stop alleged unfair trade practices in the Japanese market. JFTC's recommendation directs Intel's Japanese subsidiary, Intel K.K., to stop sales practices that it alleges shut out competitors from the Japanese microprocessor market.

Momentum is building against Intel in Europe, too as the European Commission's Competition Directorate said it has collaborated with Japanese investigators on the Intel investigation.

Though AMD could face extensive court time and legal expenses in the months ahead, the company's timing of the antitrust suit is opportunistic given the company's rapid rise up the technology curve, according to Ross.

"AMD finally has microprocessor technology competitive with Intel—that may exceed Intel," Ross said. "The battle is now on the chipset and platform level, as one now buys the entire (PC) platform with memory."