The Wall Street Journal-20080111-New York Probing Intel- Antitrust Officials Examine Strategies Used Against AMD
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New York Probing Intel; Antitrust Officials Examine Strategies Used Against AMD
Intel Corp.'s troubles with antitrust authorities spread to the U.S., as New York Attorney General Andrew M. Cuomo announced an investigation into the chip giant's tactics against rival Advanced Micro Devices Inc.
The state's investigators have served Intel with a "wide-ranging" subpoena for documents and information to determine whether the company had coerced customers to refrain from buying AMD chips, according to a statement issued by Mr. Cuomo.
Intel dominates sales of x86 microprocessors, the chip design that provides calculating power for most PCs and server systems. In the third quarter, Intel accounted for 76.3% of unit sales of those products, according to the market-research firm IDC.
Chuck Mulloy, an Intel spokesman, reiterated the company's position that its tactics are legal. "The microprocessor market is competitive and functioning as one would expect a competitive market to function," he said.
But AMD has long attacked Intel's practices and filed a private antitrust suit against the company in 2005 that is scheduled for trial in April 2009.
Mr. Cuomo said the agency is examining whether Intel penalized computer makers for purchasing x86 chips from competitors, improperly paid customers for exclusivity and illegally cut off competitors.
Three other government bodies have sided against Intel after studying the situation. The European Commission issued a "statement of objections" against the company in July, a preliminary ruling that can lead to fines or other penalties. On Monday, Intel issued a confidential reply to those allegations, and the company said it will seek an oral hearing on the matter.
In September, authorities in South Korea accused Intel of violating the country's antitrust laws. Japan's Fair Trade Commission regulator issued a cease-and-desist order against Intel in March 2005 over tactics that included using rebates and marketing funds to induce Japanese computer makers to buy microprocessors from Intel.
AMD, based in Sunnyvale, Calif., has a plan to build a $3.2 billion plant in upstate New York, though it has not made a final decision to proceed. Some state officials have attracted attention by taking up its cause. In August, after the European Commission ruling, New York Democrats Sen. Charles Schumer and Rep. Kirsten Gillibrand wrote to the chairman of the Federal Trade Commission, urging an investigation of Intel's behavior.
State attorneys general have long been active in filing antitrust cases, sometimes taking up cases that do not trigger federal enforcement actions. New York, under Mr. Cuomo and his predecessor, Eliot Spitzer, has taken a lead role.
"The New York antitrust division is known as the New York Yankees of state antitrust," said David Balto, a former Federal Trade Commission policy director and a Washington, D.C., antitrust lawyer.
Any case against Intel is likely to turn on how Intel structures rebates, discounts and other incentives to win a greater share of computer makers' chip purchases.
"At least so far, Intel has not been able to convince any agency that has conducted a formal investigation that its practices are legal," said Tom McCoy, AMD's executive vice president for legal affairs and chief administrative officer.
