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The FTC announced Friday that it will formally examine whether Intel abused its dominant position

Somewhere at the headquarters of AMD, there must have been a cheer that went up on Friday.  After months of losing ground to Intel, employee layoffs, and under the shadow of Intel's looming Nehalem architecture, the company finally had some good news to be happy about.

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.

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RE: If this is what it takes, so be it.
By danrien on 6/8/2008 9:57:14 PM , Rating: 5
When a company pays another company whom buys products from them to not advertise their competitor's products, that's not competing in a free market, but instead closing a market out so your competitor can effectively not compete. Thus, as US law has held for many years, it is violating the rules that apply to a monopoly.

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.

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. The question that AMD is asking, entering their fourth decade of existence, is why? And in the end, the talent at AMD doesn't lose, there are plenty of experienced, intelligent individuals there who will find jobs elsewhere; instead it is us, the customers, who lose, from price rigging and unfair market manipulation.

RE: If this is what it takes, so be it.
By BansheeX on 6/9/08, Rating: 0
By adiposity on 6/9/2008 11:56:07 AM , Rating: 4
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.

You're right, a better analogy would be if the Lakers stood outside the Celtics' stadium all next year and paid people not to go in. And continued this practice for a decade until the Celtics were so poor they could only afford d-league players. And then claimed they were beating the Celtics because they had better coaching.


By Reclaimer77 on 6/9/2008 12:13:03 AM , Rating: 2
I don't need you to explain the situation to me, thank you. But people are trying to make this bigger than it is. Why do you think the fines have been so low ? 25mil is peanuts.

You can hold Intel accountable for unfair practices. What I'm saying however, is that you cannot heap AMD's current situation and problems on Intel.

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.

This perfectly illustrates what I'm saying. Intel has NOT been " cheating " AMD for decades. And you are only listing the things AMD has done right. I notice you left everything they have done WRONG off your list.

Hold Intel accountable, fine. Blaming them for AMD's problems in the market is just petty. The simple fact is the better product does not always win in a free market.

Bose is a perfect example. Their speakers, especially their all in one stereos are pure garbage. Yet they have a huge market share with massive customer retention and loyalty. Why ? The consumer doesn't know any better. Bose has marketed themselves masterfully. Just like Intel marketed the Pentium 4. Do you think the majority of the consumer base knew it was " inferior " to AMD ?

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