PRESS RELEASE: AMD files antitrust case against Intel

Zardon

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(r), Solaris and Linux families of operating systems. Even Apple(r), 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(r) 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(tm) 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.

blah

Its about friggen time.

WaltC

Let's hope AMD is successful in giving Intel the kind of PR black-eye and KO Intel so richly deserves. Here's hoping Intel gets knocked flat. It never amazes me to hear people talk about how much money Intel's got--but it does always amaze me to hear them admit that they have no clue as to *how* Intel maintains its wealth--as most of us know it surely hasn't been on the basis of having the best technology for a long, long time.

BWX

Great news... I hope AMD demolishes Intel in court (all of them). Nothing worse than a money grubbing monopoly.

daedal

I'll be the lone wolf here and just hope that Intel pulls it off. I don't think we should be "forced" to use one company's products and I like the way the market sits right now.

bananaman

COME ON AMD!!!!

AMD deserve to win this and hopefully this will lead to a much fairer market for competition, benefiting the consumer in the long run!

hurrah

I would not like to be in the Intel camp at this moment - wonder how large the settlemnet will be!!!

nana

Alistair

I doubt they will settle. Intel can afford the lawyers to battle it all the way to the Supreme Court and back.

FDM80

This really isn't about us being forced to use one company's product. It's about businesses being able to make their own decisions and having the freedom to run their business their way without having someone bully them into doing other things. It's like mcdonalds charging you twice the normal price because they saw you go to burger king once. You doing business with someone else shouldn't be a penalty. That's what a free market is about. Freedom of choice is one of the cornerstones of our economy and when that isn't happening it really isn't a free market anymore.

blown503

Now Maybe Amd will lower their price on the high end 64 bit cpu's if they win. You know they are doing things the intel way now, as far as pricing is concerned.

Zardon

Can you elaborate on that a little?

Zardon

some of you might like to get involved in a little flaming

Intel points gun at CEOs

EcPercy

LOL... Speaking of flaming. I was looking on some news sites to see what others are saying about this and they are bashing the crap out of AMD. They are basically saying that Intel is "just doing business".

I have to agree with AMD on this one. If Intel is really doing everything that is said in the complaint then I think that AMD deserves to get a nice bit of cash out of Intel for the potential profits that were stolen when they "pursuaded" those companies to shut AMD out.

bananaman

and i bet those same people hate Microsoft for their abuse of their monopoly and flame Microsoft for shutting out competitors!!

monopolies dont help anyone except the dominant companies shareholders!!

nana

mkk

Intriguing. Now that the ball has started to roll I hope it won't take several years for the proceedings to lead anywhere. It will also be interesting on a general basis to see what those famed anti trust laws are worth in this day and age. The evidence shouldn't be too much less than 'overwhealming'.

The_Neon_Cowboy

Intel been engaeing in unfair pratices for years and years!

customers being told thier high dallor software ($5,000 $10,000+ in licences) they use won't work on AMD systems! there for the contenu to upgrade to intel this day......

This was in the P3 (coppermine) vs K7 (thunderboard) days and amd was way
faster for things like games etc.. and still is...

they have been doing unfair stuff for a verry long time!

Stop It

I hate to be the one to be defending the evil monopoliser, but hey, nobody foced these companies to accept Intels money, if AMD could have done better they would, this all looks like sour grapes, exclusivity deals are evident in nearly every industry, the ones listed here look to be made totally willingly, and if they werent they would have went to AMD in a shot, maybe AMD cant take a hint and realise that Intels business plan is clever, rather than anti-competition.

mike2h

good points stop it.
if amd had/has the clout intel does they would probably be doing the same thing. the reverse is true too, if amd was the big gorilla intel would be doing the same thing right now.
we will not know all the details until this really gets rolling. i would not be jumping on amd's band wagon just yet.

mike2h

thats because it was true. i can give you a perfect example. a freind of mine is part owner of a small engineering firm(they do small projects throughout ca, id, nv, az, & or). back in the p3/ k6-7 days they actually had a major program that would not function properly on amd based systems. this held true for various other programs & games. these problems were 'fixed', but unfotunately for amd the stories continued long after they were no longer true.
part of the problem(s) was related to chipset design(it was so bad at the time that amd actually came out with its own chipset). this, imo, has always been amds weakness(not as much as it used to be),they exert no control over chipset design/quality. while intel does, massively.
intel might not have the most cost effective cpu's but their chipsets are the best out there. even counting some of their screwups.
bty. my freind has only just started buying amd based platforms over the last year(my rec). he also had a very bad experience with his gaming comp catching fire at home. it was a tbird whose cpu fan had froze up. it was actually more of a smolder than a fire but he lost the cpu, mb, & 1 stick of ram. of course this was years ago & a lot has changed since then. would not beleive what i had to go through to talk him into taking a look at amd again.

bananaman

Interesting points, but I would argue that if Intel tempt them with enough money they have to accept otherwise they would be acting in a way that was not the most beneficial for their shareholders, so although they have a perceived freedom, financial reality, and the reality of company structure will dictate their answer, which will almost always back financials incentives if they outweigh the downside.

nana

MSX

So let me get this straight. AMD would be doing the same thing if they were in the opposed position?

Yes, and that is why we have anti trust laws. To encourage competition and keep companies from blackballing their coustomers (Which is exactly of what intel is being accused of). I know you may love intel for what they delivered over the years, but once a company gets to using "mob tactics" they should be put in their place, and this should have been done back in 2000 when Intel was not even denying its "clever business strategy".

I've seen intel and amd boards with exploding capastors, chips burn up, cracked cores and what have you. So I usually buy the cheapest most powerful one at the time. Personally it pisses me off whenever someone goes with intel "because they're better" with absolutly no rational. The same true for the opposite camp (though admittadly amd loyalists are few and far between).

Technology is not a car. Sometimes you get lemons, but when you have only three (via) company's to choose from just grit your teeth and go with whats best/cheapest.

Then there are the pre-concieved notions of "whats best". But I'll not talk about that. The tech market moves too fast for any sort of blind company loyalty. Which is exactly why I get crappy computers at my work for the price of a decent gaming system. I think my boss is getting sick of the jokes at his expense.

I'm also always tempted to root for the underdog so: go amd.

Stop It

Points taken MSX, but I am not siding with Intel due to brand loyalty -I have used AMD chips for years now- but because I believe the charges have been "sexed up" by AMD, they try to look like they are looking out for the companies involved, and ultimately the customers, but I honestly think they are only interested in their own sales being affected, maybe during this case, the companies AMD accuse Intel of bullying will give their account, and we will see if AMD were being courageous, or being plain old jealous of intel, time will tell.

Zardon