It’s no small mystery that AMD these days simply seems incapable of outcompeting Intel. Intel argues that this is due to its superior products. AMD, however, has long maintained that Intel was deploying anticompetitive processes, which it says are digging it into a hole from which it cannot escape. However, despite a passionate ad campaign and lengthy discussions with antitrust officials in the U.S., AMD has seemingly had a tough time selling its idea that Intel was cheating in the microprocessor war.
The U.S. Federal Trade Commission (FTC), which supervises free trade in the U.S., announced that it was launching a formal antitrust investigation against Intel. The stakes are high for both Intel and AMD; the total market for microprocessors racked up $225 billion in sales last year.
Both Intel and AMD realize what’s at stake and have spent tens of millions in legal expenses and on public relations campaigns. AMD had previous success in Europe, Korea, and Japan -- all of which have investigated Intel or threatened it with possible fines. However, the biggest victory -- a U.S. antitrust investigation -- seemed out of reach until this week.
State authorities and federal appointees from the Bush administration have been taking a more lenient approach to antitrust that their European counterparts. However, the major decision Friday marked a sharp new shift in policy.
The new investigation originated with the new blood -- William E. Kovacic, the new chairman of the trade commission. With the backing of his fellow commissioners, he reversed the decision of Deborah P. Majoras, the previous chair, who had been blocking the investigation for months to the frustration of those on Capitol Hill. Majoras was a more lenient appointee, and helped work out the antitrust settlement in 2001 with Microsoft.
It will take months before formal charges against Intel might be made, so the upcoming administration’s stance will greatly factor into the case. AMD is relying on the federal case as only one state -- New York, at the behest of attorney general Andrew M. Cuomo -- has agreed to investigate Intel on a state level. California attorney general Jerry Brown denied AMD's pleas, derisively commenting that he was "not barking at every truck that comes down the street."
D. Bruce Sewell, Intel’s senior vice president and general counsel, says that the U.S. antitrust laws are different than European ones, and it will not be charged. Intel is planning on racking up its Capitol Hill efforts, though, likely in the form of lobbyist dollars.
The first signs of the upcoming bad news for Intel appeared when chip manufacturers began to get subpoenaed by the FTC. The FTC is working with Europe and other foreign governments to obtain evidence to use against Intel in a possible case. Mr. Sewell said that he was working amiably with the FTC on a less formal review since 2006 and that Intel would remain cooperative.
AMD's top executives expressed their pleasure over the Commission's decision. Tom McCoy, executive vice president for legal affairs at AMD, stated, "Intel must now answer to the Federal Trade Commission, which is the appropriate way to determine the impact of Intel practices on U.S. consumers and technology businesses. In every country around the world where Intel’s business practices have been investigated, including the decision by South Korea this week, antitrust regulators have taken action."
The largest U.S. antitrust investigation since the Microsoft one of the 90s came the same week as more good news for AMD; Korean officials slammed Intel with a $25 million fine for violating its fair trade laws. The Korean officials discovered that Intel illegally paid Samsung Electronics and the Trigem Company $37 million in payments between 2002 and 2005 to not buy AMD processors. The European Union's European Commission (EC), which charged Intel with "the aim of excluding its main rival from the market" is expected to expand its charges this year.
Intel currently owns somewhere between 80 to 90 percent of the worldwide microprocessor market. Many U.S. citizens do not realize that U.S. laws do allow monopolies, unlike elsewhere, but forbid companies with a monopoly from using its dominance to restrict competition.
With mounting evidence worldwide, Intel faces a tough case before the FTC. However, it will likely do what it takes, or perhaps more aptly write the lobbyist checks needed to prevent it from becoming the next Microsoft. Meanwhile, AMD will also likely step up its efforts in hopes that it can stop its downhill slide by a court victory over Intel.
quote: As much as I am pro free market, Intel cannot be allowed to destroy the competition. It's just bad for consumers.I don't want Intel's only competition to be Moore's Law.
quote: Now the true difference that we can start to debate is whether or not Intel actually colluded with OEM's to choose their products vs. AMD's
quote: Why is it inherently bad for suppliers to make exclusivity payouts with producers?
quote: The Korean officials discovered that Intel illegally paid Samsung Electronics and the Trigem Company $37 million in payments between 2002 and 2005 to not buy AMD processors.
quote: Suppose Intel's chips were half the performance of AMD and they paid Dell the same amount to be exclusive, do you think Dell would have benefited?
quote: Monopolies always fix prices. And they are fixed according to their profit needs, not the consumer's expectations.
quote: And without competitors, almost nothing motivates a company to work on really better products (better <> new) as that implies a higher cost than simply coming up with "simple" product refreshes.
quote: And if they do it, it creates so large a disparity between cost and price that someone else will come in and undercut them. Thus the price fixing is UNSUSTAINABLE without extracurricular government help.
quote: You know that people are talking about monopolies here, there is no one else???? That's the point.
quote: If you're talking about new companies coming into the market, you think that the company which has a monopoly to defend will give the newcomer an easy ride?
quote: This whole article is in direct conflict with your statement. You have Intel which during 2001 - 2005 had a uncompetitive product bordering horrible. There wasn't government intervention at all and the result is that even though Intel had an inferior product, it had absolutely no effect on them. Why?
quote: Um, no. AMD bascially survived those years because their products WERE better,
quote: Also there several times within this time period were Intel could not supply enough processors to market.
quote: Actually you should pick your poison and have a better understanding what this suit is about before you list facts that aren't.
quote: Most "joe smoes buying a Dell or Gateway" didn't know what Intel was either, just that the sales guy on the floor says Intel > AMD because that is what he has been instructed to do.
quote: In effect it's like you paying the ref at the basketball game so your team wins. On one side, you could argue that you were just "competing" differently to win the game, but on the other hand, the other team never even stood a chance, and thus the fans (the customers) lost the chance to see a good game.
quote: What's absolutely hilarious about this analogy is how wrong it is, and how I keep getting rated down trying to explain to people the difference. The referee has powers that a player doesn't. The government has powers that the private industry doesn't. He can eject players, he can deny points, he can give points, and he can also be bribed. The referee is the government, but Intel never colluded with government. They made a legitimate contract with several OEMs, who took a calculated risk to gain more from a payout than prospective losses to other OEMs offering purportedly good AMD chips. In no way could Intel prevent customers from choosing AMD, only under certain brands. It would literally take an infinite amount of capital to not only buy out existing OEMs, but suppress prospective startups.
quote: Basically, AMD has been trying to play catch-up to Intel for a few decades now, and everything they have attempted - having better products, doing large marketing campaigns, etc., have not worked.
quote: Once any company becomes a monopoly, it effectively lives outside of economic forces.
quote: So follow me here, if a company is a monopoly and can control prices, HOW CAN A FREE MARKET APPROACH PROTECT A COMPETITOR WITH A BETTER PRODUCT??? The answer is it can't. We see it all around us... higher and higher gas prices, which from our last conversation, I'm still waiting for your free market theory to kick in and bring down the prices of energy since we have enough alternatives to fossil fuels in existence that something should be kicking in right about now dont'cha think?
quote: A monopoly CAN'T control prices. You CANNOT be forced into a buying a product unless government dictates such with your money (subsidy).
quote: A monopoly CAN'T control prices.
quote: an exclusive privilege to carry on a business, traffic, or service, granted by a government.