A Stitch in Haste

Is it any surprise that, in the wake of Europe's obnoxious antitrust shakedown of Microsoft, Intel would be next?

AMD [formerly "Advanced Micro Devices"] 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.

Those poor "victims of coercion" include such "helpless" entities as Dell, Sony and Hewlett-Packard.

And of course, AMD is not playing Robin Hood to return any money to these "victim" mega-corporations. What is AMD suing for?

"[R]elief as may be necessary or appropriate to restore and maintain competitive conditions in the x86 Microprocessor Market."

In other words, force Intel to let AMD win, which it couldn't do on its own.

I am not a particular expert on Intel or AMD (I'm also not an expert in antitrust law, although, like any good econo-lawyer, I know the basics).

On the other hand, as someone who has worked in equity research for many years, I do know the general gist of the ongoing "Intel v. AMD" contest. It goes something like this:

--Intel makes a CPU.
--AMD tries to copy it and undercut Intel on price.
--Intel makes a better CPU.
--AMD tries to copy it and undercut Intel on price.
--Intel makes a better CPU.
--AMD tries to copy it and undercut Intel on price.

And so on, for the last ten years or so. It is only recently that AMD seems to have gotten the upper hand on Intel with its new 64-bit chip. (Keep in mind also that both companies make many other chips besides microprocessors, and that there are many other semiconductor companies through the world.)

Whatever arrangements Intel may have had with its customers (which, recall, are not you and me, but the hardly powerless computer manufacturers), they do not circumvent the fact that, generally speaking, Intel always had the better chip. Paying more for something better is not evidence of "monopoly power," but rather of "mousetrap power" (as in "build a better mousetrap...").

Just because one competitor beats another does not mean that there was an antitrust violation or even an antitrust concern. AMD's complaint (PDF - 48 pages) compares Intel's conduct to a "cocaine dealer" that beat computer maker Gateway into "guacamole." That's not a reasoned grievance — that's sour grapes.

Stated differently, compare these two quotes:

"For most competitive situations, this is just business. But from a monopolist, this is illegal."
--Hector Ruiz, AMD Chairman, President and Chief Executive Officer

"[N]o U.S. antitrust regulators or courts have declared Intel a monopoly. AMD must thus prove the monopolist allegation even though AMD's very existence could be wielded as a counterargument."
--AP report on the lawsuit.

This is not antitrust — this is bratty whining. And it will likely achieve nothing, since the government has shown no interest in Intel throughout the entire PC revolution.

As one Wall Street analyst put it (I'm paraphrasing): "The only impact on these two companies will be to increase their legal expenses."

Time to give "loser pays" another look.

UPDATE: Intel has filed its answer to AMD's complaint and basically calls "Shenanigans!" on the lawsuit. One interesting factoid: AMD apparently runs its manufacturing facilities at full capacity. How can AMD claim to be losing business to Intel's "anticompetitive business practices" if AMD is selling all the chips it can make?