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AMD Brings Antitrust Suit Against Intel

The smaller chip maker says its rival forces PC makers to limit their use of the plaintiff's wares.

June 29, 2005|Terril Yue Jones | Times Staff Writer

SAN FRANCISCO — Advanced Micro Devices Inc. sued archrival Intel Corp., accusing the world's largest chip maker of bullying computer companies and employing other illegal tactics to gain a stranglehold on the world semiconductor market.

The 48-page antitrust lawsuit filed in U.S. District Court in Delaware late Monday claims that Intel uses discounts, kickbacks and threats of cutting off business to maintain its 80% share of the $28-billion computer processor market. The tactics limit choices for customers and keep prices high, AMD said.

"Intel uses its monopoly position to block competition and hurt its customers," AMD Chief Executive Hector Ruiz said in a conference call Tuesday. "Earned success is one thing; illegal maintenance of a monopoly is another. Monopolies do what is good for them, not their customers."

Intel, based in Santa Clara, Calif., dismissed AMD's allegations and said it would mount a vigorous defense.

"We strongly disagree with AMD's complaints about the business practices of Intel and Intel's customers," the company said in a statement. "Intel believes in competing fairly and believes consumers are benefiting from this vigorous competition. AMD has chosen yet again to complain to a court about Intel's success with a legal case full of excuses and speculation."

The suit by AMD, based in Sunnyvale, Calif., follows a number of antitrust actions against Intel.

This year, Japan's Fair Trade Commission accused Intel of violating anti-monopoly laws by demanding that customers outfit no more than 10% of their personal computers with AMD chips in order to maintain their Intel supply. Though it denied wrongdoing, Intel did not contest the Japanese charges, and it said it would change some business practices.

The European Commission also is investigating Intel for possible antitrust violations.

In 1998, three corporate customers brought an antitrust case before the U.S. Federal Trade Commission involving patent infringement. The case was settled the following year.

In 1991, AMD sued Intel on antitrust claims. That case was settled out of court.

Complaints about Intel's business practices have been voiced in Silicon Valley for years.

"The buzz within the valley here is that what AMD is alleging is part of what goes on," said Michael Cohen, an analyst with Pacific American Securities who follows Intel and AMD and owns AMD shares. "The Japanese FTC seemed to affirm that."

AMD's suit this week alleges that Intel coerced 38 companies, including computer makers Dell Inc., Sony Corp., Toshiba Corp., Gateway Inc., Hitachi Ltd., NEC Corp. and Fujitsu Ltd., to severely restrict their use of AMD chips or to forgo them altogether. It also claims that system builders, distributors and retailers have been harmed by Intel's alleged practices.

"All these companies face the same choice: Either accept conditions that exclude AMD or face competitively crippling treatment," the suit says. "Intel's conduct has capped AMD's market share and forced computer manufacturers to pay monopoly prices. Consumers around the world are paying for Intel's actions through higher prices, fewer choices in the marketplace and an artificial constraint to innovation."

If AMD is able to change Intel's business practices, "it would be a big plus for AMD in the long run and lead to a more open marketplace," Cohen said. "I believe that the biggest barrier facing AMD is not Intel's strength in technology or efficiency, but rather the way Intel exercises its industry clout."

Any litigation between the rivals is likely to be protracted.

"It's critical to realize that monopolist conduct receives special scrutiny," said David Balto, an antitrust expert at law firm Robins Kaplan Miller & Ciresi in Washington and policy director at the FTC in the Clinton administration. "The courts will look very critically at whether Intel has a legitimate business purpose for these practices and whether consumers are better off."

AMD is seeking unspecified damages, but the company's lawyer said the suit aimed to force Intel to alter its practices.

"This is not about money," said Chuck Diamond, an attorney at law firm O'Melveny and Myers. "This is about breaking open the market, breaking the iron grip Intel has exercised for its customers over the past decade."

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(BEGIN TEXT OF INFOBOX)

Global PC microprocessor market share for first quarter of 2005, by units:

Intel: 81.7%

AMD: 16.9%

Other: 1.4%

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