AMD files anti-trust complaint against Intel in US Federal District Court

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bcrabtree
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AMD files antitrust complaint against Intel in U.S. Federal District Court

Complaint Details Worldwide Coercion of Computer-Makers, System-Builders, Distributors and Retailers from Dealing with AMD

Intel's Illegal Acts Inflate Computer Prices and Limit Choices for Businesses and Consumers

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, Solaris and Linux families of operating systems. Even Apple, 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 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 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, please visit:
http://www.amd.com/breakfree

Leading publications such as The Wall Street Journal, The Washington Post, The Economist, San Jose Mercury News and CNET have recognized AMD as a leader in microprocessor innovation.

AMD has achieved technological leadership in critical aspects of the x86 market, particularly with its AMD Opteron microprocessor, the first microprocessor to take x86 computing from 32 to 64 bits, and with its dual-core processors.

The company has also stated its commitment to help deliver basic computing and Internet connectivity to 50 percent of the world's population by the year 2015.

Press and Analyst Conference Call
Hector Ruiz, AMD chairman, president and CEO; Thomas M. McCoy, AMD executive vice president, legal affairs and chief administrative officer; and Charles P. Diamond, partner at O'Melveny & Myers, LLP and AMD's lead outside counsel will discuss the details of the antitrust complaint against Intel at 9:15 AM PDT today on an audio conference call. Following their remarks, there will be a question and answer session.

Dial-in number: (651) 291-0618
Code: 786995

Replay number:
(800) 475-6701 in North America
(320) 365-3844 outside the U.S.
Code: 786995

The audio conference will be available live and for 10 days after the conference call at www.amd.com/breakfreewebcast

AMD's Position on Fair and Open Competition
AMD stands for fair and open competition and the value and variety competition delivers to the marketplace. Innovative AMD technology allows users to break free to reach new levels of performance, productivity and creativity.

Businesses and consumers should have the freedom to choose from a range of competitive products that come from continuous innovation. When market forces work, consumers have choice and everyone wins. For more information, please visit:
http://www.amd.com/breakfree.

About AMD
AMD (NYSE:AMD) designs and produces innovative microprocessors, Flash memory devices and low-power processor solutions for the computer, communications and consumer electronics industries. AMD is dedicated to delivering standards-based, customer-focused solutions for technology users, ranging from enterprises to government agencies and individual consumers. For more information, visit www.amd.com

Tweaked ever so slightly for easier reading (emboldening, para-breaks, removing trade-mark refs, etc) but NOTHING substantive changed. BC

Original release is here

bcrabtree
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Joined: Mar 7 1999

Amazed that nobody has commented!

I've also created a news story about this - based on the key elements as I see them, with a tiny bit of comment at the end.

The story is here.

What I'd like, though, is Intel's take, but I'm working on that.

Have to say that I found the whole thing quite riveting, even the full 48-page submission, which is accessible from the link given above ie:
http://www.amd.com/breakfree

And, that link is to an open letter by AMD's top man, and that itself makes interesting reading.

Bob C

DVdoctor
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Joined: Apr 1 1999

It is interesting that no one has linked the Apple decision with the AMD legal action.

US law is pretty complex, and the key point is whether or not Intel has a monoploy. Up until the Apple decision it could be argued that Intel did not, that IBM with the powerPC was at least from a technical standpoint an alternative and so was AMD. Everything that Intel has done is (as hard to believe as it might be) totally legal IF they do not have a monoply. Corporate marketing is "WAR" and this stuff goes on every day.

Part of the problem is that AMD missed the entire Apple deal and certain to come out of it is 1 did Intel strong arm Apple? or Did AMD simply fail to see the obvious opportunity? or did Apple simply think that after being left in the lurch by IBM they had no choice.

So what is likely to happen, just as with Microsoft, there will be lots of back and forth with the lawyers, and eventually Intel will payoff AMD, problem for AMD is that during all this INTEL will totally take every waking moment of the people incharge with a counter attack, wth endless many centuries spent is depositions, and discovery process. Intel has a massive army to battle with. It is interesting that it is AMD taking the action and they are not joined by Dell or HP or anyone else. This SERIOUSLY weakens the case.

So who wins in all this, well short term certainly the lawyers, long term AMD will get some cash, Intel will get a slap on the wrist and promise not to do it any more.... and life will continue. Meanwhile Apple will be using Intel, and so will Dell.

AMD lost two major opportunities over the last several years

First they lost the X box deal with Microsoft. A win here would have been hugh boost in credibililty. Second they never were even in the game for Apple if we are to believe the remarks being made.

SO was it all dirty tricks on Intel's part, or just a case of being totally out marketed and out sold in the market place. I am sure Bob C sees a lot of similarities with WH Smith in mag distribution.

John

Alan Roberts
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US legislation is deliberately made foggy, so the only winners in cases like this are the lawyers.

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PaulD
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Joined: Aug 31 2002

Hi
I would guess that AMD were never for a moment in the running for an Apple deal. If Apple were to use an AMD CPU they would be at the mercy of a range of motherboard chipset designers/producers who would have very little shared interest with Apple's design view of a multimedia-focussed computer.

With Intel they can do a deal for the whole integrated CPU/chipset solution which would have enough Apple-proprietary design ingredients to ensure OS X can only run on Apple-branded hardware, with Apple-ROMed bios code.

bcrabtree
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Joined: Mar 7 1999

Here's a slashdot thread for those who'd like to read some entertaining debate on this matter.

Bob C

DVdoctor
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Joined: Apr 1 1999

Great stuff

The point I was trying to make about AMD and Apple was not whether or not Jobs ever considered AMD or not but the legal point that Intel has to be seen as having a monoply. Intel would have argued that in the pc space there were really three main players, themselves, IBM and AMD, once apple decided to move to Intel, it moved IBM out of the list and it is just Intel and AMD. As crazy as it sounds until you are a monopoly you can do all the stuff Intel did, the complaint has to go forward based on the fact that they did this and are a monoploy.

Bottom line, Intel will settle, pay AMD some cash.... and life will go on.

John