Update: AMD files broad antitrust suit against Intel

Rival is accused of coercing PC vendors worldwide into using only Intel chips

Advanced Micro Devices Inc. has filed a wide-ranging antitrust suit against Intel Corp., accusing it of maintaining its monopoly in the PC processor market by illegally coercing customers around the world into using its products, AMD announced today.

The suit, filed in the U.S. District Court for the District of Delaware, identifies 38 companies on three continents that were allegedly coerced by Intel, including large-scale computer makers, small system builders, wholesale distributors and retailers, according to a statement from AMD in Sunnyvale, Calif.

The 48-page complaint (download PDF) alleges that Intel used illegal subsidies to win sales and, in some cases, threatened companies with "severe consequences" for using or selling AMD products.

A spokeswoman for Intel in Hong Kong said the company had yet to receive formal notice of the compaint from AMD or the U.S. courts.

"We won't have any comment until we do," said Intel spokeswoman Laura Anderson.

The case pits Intel, the world's largest manufacturer of microprocessors, against its main rival in what could be a long and tough legal fight.

AMD's litigation follows a recent antitrust investigation of Intel by the Japan Fair Trade Commission (JFTC). In March, the JFTC found that Intel had abused its monopoly power to exclude fair and open competition in the Japanese microprocessor market. The result was to substantially restrain competition, the JFTC said.

Intel's Japanese subsidiary agreed in April to refrain from several types of business practices, although it also said it disagreed with the JFTC's findings.

The European Commission has also said that it is pursuing an investigation against Intel for possible antitrust violations and that it was cooperating with the Japanese authorities.

AMD's complaint lists several examples of how Intel has allegedly abused its dominant market position. One of them claims that Intel forced major customers, such as Dell Inc., Sony Corp., Gateway Inc. and Hitachi Ltd., into exclusive deals in return for outright cash payments, discriminatory pricing or marketing subsidies.

Intel has also been investigated by U.S. antitrust regulators, although the charges were different in nature. The U.S. Federal Trade Commission filed suit against the chip maker in 1998, accusing it of using its market dominance to coerce trade secrets from some of its customers.

According to the FTC, Intel threatened to withhold information about future chips from three vendors -- Digital Equipment Corp. and Compaq Computer Corp. (which are now part of Hewlett-Packard Co.) and Intergraph Corp. -- unless those companies agreed not to sue Intel over any potential patent violations. The FTC said such strong-arm tactics were against the law when practiced by a company as dominant as Intel.

Intel eventually settled the case in March 1999. It agreed to refrain from certain practices but denied any wrongdoing.

Another complaint involves the European joint venture Fujitsu Siemens Computers (Holding) BV, which was once a mainstay for AMD's desktop business, with AMD chips powering more than 30% of Fujitsu Siemens' consumer PCs, according to the complaint. In early 2003, Intel offered Fujitsu Siemens a "special discount" on its Celeron processors. Fujitsu Siemens accepted the offer in exchange for hiding its AMD computers on its Web site and removing references to AMD-powered products from its retail catalog, according to AMD.

Intel also managed to persuade Fujitsu Siemens to limit the markets in which it sells AMD-powered PCs, according to the complaint. Its parent, Fujitsu, currently sells an AMD-equipped notebook, the Lifebook S2010, but only in the U.S. and Japan. Fujitsu Siemens declined AMD's plea to offer the machine in Europe as well, AMD said.

AMD's share of Fujitsu Siemens' business recently fell below 30% for the first time in four years, the company said.

Fujitsu Siemens is also among the companies that reported being intimidated from participating in the Opteron 64 launch in 2003, according to AMD. The others include Taiwan's Micro-Star International Co. Ltd., Atipa Technologies and Solectron Corp.

Intel representatives told Fujitsu Siemens' executives in the weeks preceding the Opteron launch that if they attended, they would be the only Tier 1 computer maker to do so because all the others would back out, according to the complaint. With the exception of IBM, Intel was right.

IBM was another target of what AMD calls "Intel's relentless campaign to undermine marketing efforts by its one remaining competitor." IBM pulled its AMD-powered computers from the 2004 Palisades eServer and PC Show citing a contractual agreement with Intel that prohibited IBM from endorsing competing products, according to the complaint. And at last year's SuperComputing Show, an annual conference devoted to high-performance computing, Intel offered two other computer makers money to remove AMD systems from their booths, according to AMD.

AMD also claims that it has been entirely shut out from MediaMarkt, Europe's largest computer retailer, which accounts for 35% of Germany's retail sales. Intel provides MediaMarkt $15 million to $20 million of market development funds annually. Since 1997, Media Markt has carried Intel computers exclusively.

Mari Hayashi, an AMD spokeswoman in Tokyo, said AMD would discuss the suit further in a conference call in the U.S. later today.

Dan Nystedt in Taipei contributed to this report.

Copyright © 2005 IDG Communications, Inc.

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