One of the first things that we noticed upon return from our Summer break is that the Intel AMD anti-trust war in Europe has stepped up another level. Most of the press coverage failed to understand that when the European Commission publishes a finding it is not like an accusation, it is more like a verdict, and this one says that Intel has abused its dominant position in an attempt to force AMD out of the PC microprocessor chip market, by offering illegal rebates to customers that agreed not to use AMD chips.
It has now made such a statement of objection, and Intel has various rights of reply, for which it has ten weeks, and of subsequent appeal, but as it happened in the case against Microsoft, it is now likely that the Commission will complete its processes and then slap a huge fine on Intel, which under EU law can be as high as 10% of the company’s annual sales. Intel’s best strategy would be to agree some terms to stick to and close out the case as soon as possible, but that just never seems to occur to corporate giants or their lawyers.
So instead Intel made the usual statements about Intel being pro-competition and that the chip market was operating normally, suggesting that this was AMD’s last action of a failing competitor, which is what most trust busters say.
The case has been bubbling under for years, but picked up a head of steam in 2004 when AMD said openly that some of the OEMs that had received rebates were prepared to speak about it.
According to the Commission the case has been made that Intel provided rebates which were conditional on no AMD purchases, and made payments to get OEMs to delay launching AMD-based versions of their products. Finally the EC says that Intel has offered chips in the server market at below cost just to keep AMD out of the market. This would be fine for a newcomer to do to gain a foothold, but not an industry dominant supplier.
In July 2005 European investigators ‘inspected’ Intel European offices and impounded various documents that were used in making the case against Intel, in a series of orchestrated raids. AMD has since repeated the claims in US and Japanese courts, and there was always a feeling that this anti-trust case, after decades of burning slowly, was going to set fire.
Make no mistake about it, it will be a serious amount of money for Intel, and it will open a door to AMD and other chip vendors, not only for survival, but there will eventually be in the remedy, a set of behavioral guidelines for Intel that will keep the door open to PC chip competitors, and that may, in the end, be the most damaging aspect of this case.
So far Intel lawyers have kept this case back for around a year, because when it was instigated, AMD was hoping to see a resolution before the end of 2006.
Giuliano Meroni, AMD president for Europe, Middle East, and Africa, said, “This is a moment of truth for the entire IT industry. We are confident that this statement of objection will be a catalyst in opening the global microprocessor markets for the benefit of consumers and PC companies alike.”
AMD used the opportunity to release its own study into Intel’s dominance, by an economist, which claims that Intel will extract over $80 billion in monopoly profits over the next ten years.
The study came from Dr Michael Williams, Director, ERS Group, covering microprocessor sales in the period 1996-2006. Dr. Williams’ analysis explains why pro-competitive justifications for Intel’s monopoly profits are implausible.
The analysis noted that consumers would save at least $61 billion over the period, with computer manufacturers projected to save another $20 billion, enabling them to increase their investment in R&D; create improved products and greater product variety; and provide additional innovation benefits to computer buyers around the world.
Judging by the Microsoft case, it will take the Commission two years or more to get through the legal steps before any punishment sticks, unless Intel changes tack and co-operates on a voluntary remedy.