AMD files antitrust suit against Intel

The 48-page complaint charges Intel with scare tactics and coercion in the latest fight over the x86-based PCs.

Michael Singer Staff Writer, CNET News.com
Michael Singer
5 min read
Advanced Micro Devices has fired off a federal antitrust lawsuit against Intel, claiming that its rival has a monopolistic grip on the PC industry.

The suit, filed Monday in the U.S. District Court in Delaware, details alleged scare tactics and coercion that AMD claims Intel imposed on 38 companies, including large-scale computer makers, small system builders, wholesale distributors and retailers.

Hector Ruiz
Hector Ruiz

Intel processors account for more than 80 percent of the computers running x86-based chips, according to IDC. Those chips run many families of operating systems, including Microsoft Windows, Solaris and Linux. Even Apple Computer has announced that it will switch exclusively to x86 processors for running Mac OS software, beginning in 2006.

The suit is different from previous anticompetition fights between the two companies, according to AMD spokesman Mike Simonoff, in that the Sunnyvale, Calif.-based chipmaker has new information obtained from a recent investigation by Japan's Fair Trade Commission.

In that investigation, the agency said that Intel's Japan unit stifled competition by offering rebates to five Japanese PC makers--Fujitsu, Hitachi, NEC, Sony and Toshiba--which agreed not to buy or to limit their purchases of chips made by AMD and Transmeta.

"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," Thomas McCoy, AMD's executive vice president of legal affairs and chief administrative officer, said in a statement.

In a statement, Santa Clara, Calif.-based Intel declined to comment on specifics of the case, saying that it will respond to AMD's antitrust allegations in court.

"We strongly disagree with AMD's complaints about the business practices of Intel and Intel's customers," the statement said. "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.

Regarding the Japanese investigation, Intel said at the time that it would abide by the Fair Trade Commission's recommendations but that it disagreed with the agency's findings and with its application of the law.

One analyst suggested that the lawsuit reveals a clue to AMD's market standing.

"Rightly or wrongly, AMD's move can be seen as a clever move to take advantage of a recent favorable ruling in Japan. However, the timing of the complaint and the company's tone of indignation (perhaps exasperation) give us a sense that AMD's traction in processors that they enjoyed last year is not meeting expectations," Hans Mosesmann, an analyst at investment firm Moors & Cabot, wrote in a research report Tuesday.

"It strikes us that AMD's approach is based on throwing everything but the kitchen sink at Intel in the hopes of getting something to stick," Mosesmann wrote.

AMD Chief Executive Hector Ruiz and some of his top executives are expected to speak about the charges during a conference call later Tuesday.

The two chipmakers have a contentious history. In 2000, AMD complained to the European Commission that Intel was violating European anticompetition laws through "abusive" marketing programs.

AMD sought to give the Commission access to documents produced in another Intel antitrust case, one filed by Intergraph. The Intergraph case was eventually settled.

The European Commission has continued to investigate Intel's marketing techniques.

Among the alleged abuses detailed Monday in AMD's 48-page complaint, the company said former Compaq CEO Michael Capellas complained that Intel withheld delivery of server chips in 2000. Saying "he had a gun to his head," he told AMD he had to stop buying its processors.

According to the complaint, Gateway executives recounted to AMD that their company paid a high price for even its limited AMD

dealings. The claim at the time was that Intel has "beaten them into 'guacamole'" in retaliation, the complaint states.

AMD has launched a Web site that details the new complaint.

Handicapping the case
One obstacle AMD could face is getting original equipment manufacturers and Intel customers to testify against the chip giant, according to some.

"If an OEM is reluctant to help, you can subpoena them to get the information, but they might not put it in the best light to help your case, or help get the facts assembled the way you want," said an antitrust attorney who asked not to be named.

AMD, however, says it doesn't expect to have difficulty getting its customers to respond.

"Privately, we've had many people in the industry tell us it would be great if they were forced to tell the truth," Simonoff said. When under oath, they'll be in that position, he said.

AMD may find a favorable audience at the U.S. District Court in Delaware, some antitrust attorneys said.

The same court recently ruled in favor of a company accused of antitrust violations, but the court's decision was later overturned by an appeals court. As a result, according to one school of thought, the district court, not eager to see another decision overturned, may be more sensitive to companies bringing antitrust complaints.

In the previous case, Dentsply International had been accused of requiring distributors of its dentures to forgo carrying competitors' products in order to receive discounts on pricing. The district court ruled in favor of Dentsply, but that ruling was reversed when the U.S. Department of Justice appealed.

One lawyer noted that courts sometimes have divergent views on how discounts should be used.

"Some courts view discounts as a normal course of competition, and other courts look at discounts as excluding competition," said Howard Morse, an antitrust and high-tech attorney with Drinker, Biddle & Reath.

Although the European Commission continues to review its case against Intel, antitrust attorneys said AMD's lawsuit may not have any bearing there.

Related story
Intel to abide by
Japan FTC ruling

Chipmaker agrees to halt
practice of requiring
PC makers to limit use
of competitors' chips in
exchange for rebates.

They note that, in general, government antitrust regulators with a case under way are usually not swayed by cases brought by private parties.

But in certain circumstances, it can make a difference, said the antitrust attorney who requested anonymity.

"If the plaintiff loses during summary judgment because the question of liability does not hold up, the government will notice and take that into consideration for their own case," the attorney said.

The public nature of a lawsuit also may put more pressure on government regulators to expedite their case, he added.

Reuters contributed to this report.