AMD Files Suit Against Intel

Updated: The suit says Intel violated antitrust laws by preventing PC makers from using AMD chips.

Advanced Micro Devices Inc. has filed a broad antitrust lawsuit against Intel Corp., claiming Intel illegally maintains a monopoly in the PC processor market.

AMD, which announced the suit on Tuesday, offered a long list of examples in which it says Intel has used its position, including its ability to offer product rebates or to dole out funds, to influence PC makers to limit their purchases of AMD chips.

The suit, filed Monday afternoon in Delaware, claims that Intel has violated the Sherman Antitrust Act, the Clayton Act and the California Business and Professional Code by influencing the product plans of computer makers and therefore limiting consumers ability to choose between different types of products, AMD said in a statement.

Technically, just having a monopoly isnt against the law. But abusing the power that comes with one is.

Thus, in order for AMD to gain court intervention, it must prove first that Intel has a monopoly—thats something thats apparent when looking at the companys market share, according to AMD—and then that Intel used its dominant position to maintain the monopoly illegally. AMD said it believes that it has enough proof there as well.

/zimages/3/28571.gifAMD gained market share during the first quarter, while Intel slipped. But chip giant Intel still has plenty going for it. Click here to read more.

The suit identifies 38 companies that AMD says Intel has pressured in one way or another. It says, for example, that Intel put pressure on Hewlett-Packard Co., whose PCs come with AMD chips, to limit its use of them.

The suit also says Intel used financial incentives in an effort to persuade Dell Inc., which does not use AMD chips, not to do so.

AMD said that its using the suit as part of an effort to level the playing field, and that its own market share would be higher if Intel werent using its market influence to prevent PC makers from using AMD chips.

The chip maker also says its representing the interests of consumers. Consumers would have greater choice and their computers might ultimately cost less if Intel and AMD were able to compete more directly on technical merits and price, AMD executives said.

Shutting out AMD chips from computers keeps AMD from competing on both fronts, the company said.

"We just want to be able to go in and be able to compete product by product for business," said Drew Prairie, an AMD spokesperson. "Were coming at this from a position of strength in terms of having the best product portfolio weve ever had … and still our market share hasnt grown in the past few years the way our products would indicate it should have."

Intel, in any given quarter, typically commands around 80 percent of PC processor shipments. During the first quarter, Intel garnered 81.7 percent of the market versus AMDs 16.9 percent share, according to Mercury Research.

AMD has cooperated with several investigations of Intels practices, including a recent action by Japans Fair Trade Commission and an ongoing European Commission investigation into Intels practices there.

The JFTC ruled against Intel, saying the chip maker used its position to influence several Japanese PC manufacturers to limit or eliminate AMD chips used in their systems. Intel, in response, accepted the JFTCs recommendations, which called for it to cease practices such as offering favorable prices to companies that agree to limit their use of AMD chips. But the company said it disagreed with the JFTCs finding of facts and with the application of the law in its recommendations.

/zimages/3/28571.gifClick here to read more about Japans and Europes investigations into Intels policies.

Now AMDs taking the law into its own hands. Its 48-page suit details numerous cases where it says Intel took illegal action to limit companies purchases of AMD chips or prevented them outright.

An investigation by AMDs lead outside counsel showed that after HP began using AMD chips in notebooks sold at retail, the suit says, Intel responded by withholding HPs fourth-quarter 2004 rebate check. It allowed HP to make up the loss in following quarters by promising at least 90 percent of its "mainstream" retail business to Intel, AMD said in the suit.

The suit also says Intel used similar practices to entice other major customers, including Dell Inc., Gateway Inc., Hitachi Ltd., Sony Corp. and Toshiba Corp., into making Intel-exclusive deals in return for cash payments, discounted chip pricing or marketing subsidies. In addition, it used things such as rebates and so-called market development funds to get others, including Acer Corp., Fujitsu Ltd. and NEC Corp., to agree to partial exclusivity agreements.

Next Page: Did Intel establish enforced quotas?