– Complaint Details Worldwide Coercion of Computer-Makers, System-Builders, Distributors and Retailers from Dealing with AMD –
– Intel’s Illegal Acts Inflate Computer Prices and Limit Choices for Businesses and Consumers –
SUNNYVALE, Calif. -- 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, Solaris and Linux families of operating systems. Even Apple,
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 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 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.
Leading publications such as The Wall Street Journal, The Washington
Post, The Economist, San Jose Mercury News and CNET have recognized AMD
as a leader in microprocessor innovation. AMD has achieved
technological leadership in critical aspects of the x86 market,
particularly with its AMD Opteron microprocessor, the first
microprocessor to take x86 computing from 32 to 64 bits, and with its
dual-core processors. The company has also stated its commitment to
help deliver basic computing and Internet connectivity to 50 percent of
the world’s population by the year 2015.
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