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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 Schrag4 on 6/9/2008 11:17:33 AM , Rating: 3
quote:
Why is it inherently bad for suppliers to make exclusivity payouts with producers?


You're right, this isn't bad, but the article paints a slightly different picture:

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.


It doesn't say that Intel paid those companies to buy Intel only (exclusivity as you mentioned). It says Intel paid those companies to not buy AMD. If the article is worded incorrectly (or incompletely), please change it. Otherwise, this sounds like a horrible thing for Intel to do.


RE: If this is what it takes, so be it.
By therealnickdanger on 6/9/08, Rating: 0
By callmeroy on 6/9/2008 1:34:33 PM , Rating: 5
As one who has read the entire court case that AMD originally filed against INTEL (side-note if your only source of info on this case is the paltry stuff posted here on DT you don't know 1/10th of AMD's whole claim), and AMD claims and reports to have evidence of several shady dealings by Intel of an anticompetitive nature - one including special deals on a per customer basis, another issue in the case file was pretty much Intel's alledged slandering of AMD on false grounds just to cut down their reputation and win over customer and yet another was Intel offering "bribe-like" incentives to customers if they ignored AMD business.

Whatever you think - all those things I just named are illegal to do in business. Now do you know of business that do that sort of thing everyday, maybe -- do I yeah perhaps..but remember the old story "you are only in trouble if you get caught"...pretty much the same with this stuff. Shady business deals or questionable business deals go down every day of the week -- its only the ones who get caught you read about.

Funny how times change -- I remember thinking "so what"...when everyone wanted to burn Microsoft at the stake for making IE part of the OS and I seemed to have been alone then. But now this case comes along and what Intel is accused of doing to AMD is 100 times worse that the Microsoft IE thing IMO, yet people are backing Intel.

Interesting...


By Schrag4 on 6/9/2008 2:20:24 PM , Rating: 2
I think you totally missed my point. I actually agreed with you in my previous post. However, the article, as worded, claims it went down more like this:

"Hi, I'm with Intel and we don't care who you buy CPUs from, but we'll give you large sums of money if you would NOT buy from AMD. Buy from anyone else, just not AMD."

The obvious reason for doing this would be to kill off a much smaller competitor that doesn't have the reserves to survive losing money for several years. If the competition is small enough and dies off quickly enough, you can make up the 'bribe money' after they're gone in the form of higher market share and/or higher prices.

Again, let me stress that according to the law, exclusivity deals are OK. But the article is worded in such a way that suggests that Intel went beyond mere exclusivity deals.


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