With possible action by the Federal Trade Commission looming, an unidentified Dell executive is cited prominently in legal documents as a person who might exonerate Intel, or at least mitigate the severity of the charges leveled against it for alleged antitrust behavior. So, what is known about this Dell mystery man?
This week the Dell executive, referred to as "Mr. A," was cited throughout the European Union ombudsman's "decision" on on a complaint filed by Intel about the European Commission's ruling against the chipmaker. Ombudsman P. Nikiforos Diamandouros' November 18 decision found "maladministration" on the part of the Commission because of its failure to make a "proper note" of a meeting with Dell--represented most prominently by Mr. A in the the ombudsman's decision.
Diamandouros has been the The European Union's ombudsman since April of 2003.
Most importantly, Mr. A is brought up by Intel as a person who has made exculpatory statements--and therefore could refute allegations such as those made about Intel and Dell in New York Attorney General Andrew Cuomo's complaint against the chipmaker.
And who is Mr. A? He was "a senior Dell executive" and the person "responsible for Dell's relationship with Intel," according to the ombudsman's published statement.
What else is known about Mr. A? Intel asserts in its complaint to the Commission--which the ombudsman responded to in its decision--that "Mr. A's FTC [Federal Trade Commission] testimony exonerates Intel and contradicts the allegations contained in the statement of objections concerning Dell's relationship with Intel."
And Intel has had more to say about this person. "Mr. A again gave sworn testimony confirming that the key points made in his 2003 FTC testimony, to the effect that Dell did not have an exclusive relationship with Intel and that Intel did not 'threaten' or 'punish' Dell for considering a dual-source [Intel and AMD] strategy."
Also in the ombudsman's decision--which refers to Intel as the complainant: "It is clear from these events that the Commission sought to conceal and suppress exculpatory evidence. Also in the complainant's view, this misconduct (and the failure to make a complete note of the meeting which would have eliminated any debate as to what Mr. A said) constitutes a serious act of maladministration."
Intel spokesman Chuck Mulloy said Thursday that Intel continues to talk to the FTC. "Yes we are talking. We are continuing to answer their questions concerning our business practices and now we are also explaining the settlement we just completed with AMD [Advanced Micro Devices]," Mulloy said.
Experts say Intel has been instrumental in driving down PC prices, one of the key indicators of competition and one charge New York's Attorney General cannot easily level against Intel in its antitrust lawsuit.
New York Attorney General Andrew M. Cuomo on Wednesday filed a federal lawsuit against Intel accusing it of paying computer makers rebates to illegally maintain its monopoly power and preventing AMD from gaining business with PC makers.
One of the operative charges in the complaint centers on prices. "Intel launched an illegal campaign to deprive AMD of distribution channels and consumers of product choice and lower prices," the complaint alleges.
Not so fast, say some experts. "Prices are falling, buyers are not complaining about Intel's loyalty discounts, and the lower prices produce obvious and immediate benefit for consumers," said Joshua D. Wright, professor at George Mason University School of Law, and a scholar in residence at the Federal Trade Commission until 2008.
"Given the intuitive and easy to grasp nature of the consumer benefits of discounting contracts in the Intel case, I suspect that judges will be less likely to condemn these practices without real proof of actual consumer harm. I'm skeptical that AMD, (New York), or the (Federal Trade Commission) will be able to produce that here," Wright said.
And prices continue to fall. One of the most recent examples of steep downward PC price pressure is ... Read more
European antitrust regulators on Monday published internal e-mails that detail alleged antitrust behavior by Intel.
The European Commission Monday published a "non-confidential version" of its May 13 decision against Intel, which imposed a fine of $1.45 billion against the chip giant. That decision found that Intel broke EC Treaty antitrust rules (Article 82) by engaging in illegal practices to exclude competitors from the market for "x86" central processing units (CPUs).
The EC action was based on complaints from Intel's chief rival, Advanced Micro Devices.
Intel appealed the decision in July to a European court, saying that "evidence was ignored or misinterpreted."
Today, the EC fired back. Some of Monday's particulars from the EC press release include:
Intel rebates to Lenovo during year 2007 "were conditioned on Lenovo purchasing its CPU needs for its notebook segment exclusively from Intel. For example, in a December 2006 e-mail, a Lenovo executive stated: 'Late last week Lenovo cut a lucrative deal with Intel. As a result of this, we will not be introducing AMD based products in 2007 for our Notebook products'."
Intel rebates to Dell from December 2002 to December 2005 were conditioned on Dell purchasing CPUs exclusively from Intel. For example, in an internal Dell presentation of February 2003, Dell noted that should Dell switch any part of its CPU supplies from Intel to its competitor AMD, Intel retaliation "could be severe and prolonged with impact to all LOBs [Lines of Business]."
Intel rebates to HP from November 2002 to May 2005 were conditioned on HP purchasing no less than 95 percent of its CPU needs for business desktops from Intel (the remaining 5 percent that HP could purchase from AMD was then subject to further restrictive conditions set out below). In a submission to the Commission, HP stated that "Intel granted the credits subject to the following unwritten requirements: a) that HP should purchase at least 95% of its business desktop system from Intel ..." An HP executive wrote: 'PLEASE DO NOT... communicate to the regions, your team members or AMD that we are constrained to 5% AMD by pursuing the Intel agreement.'"
The EC also cited "Naked Restrictions" such as: "Intel payments to Acer were conditioned on Acer postponing the launch of an AMD-based notebook from September 2003 to January 2004. For example, in a September 2003 email, an Intel executive reported: "good news just came from [Acer Senior Executive] that Acer decides to drop AMD K8 [notebook product] throughout 2003 around the world...They keep pushing back until today, after the call with [Intel executive] this morning, [Acer Senior Executive] just confirmed that they decide to drop AMD K8 throughout 2003 around the world. [Acer Senior Executive] has got this direction from [Acer Senior Executive] as well and will follow through in EMEA [Europe Middle East and Africa region]".
AMD was quick to chime in with a comment Monday. "This is the first time that Intel has had to confront now publicly available facts of its illegal behavior and it won't be the last. The U.S. FTC and New York Attorney General's continuing investigations and AMD's civil case against Intel will provide other clear demonstrations of Intel breaking the law, and we remain confident that we will win our U.S. civil case against Intel, which goes to trial in March," AMD said.
Intel also issued a response Monday. "There is nothing new here. This Decision reflects the underlying bias we have come to expect from the case team that ran this investigation," Intel said. "The Commission relied heavily on speculation found in e-mails from lower level employees that did not participate in the negotiation of the relevant agreements," Intel said. "At the same time, they ignored or minimized hard evidence of what actually happened, including highly authoritative documents, written declarations and testimony given under oath by senior individuals who negotiated the transactions at issue."
Intel continued: "Also, the Commission consistently construed ambiguous documents in a manner adverse to Intel, while overlooking or dismissing authoritative documents as 'insufficiently clear' when they contradicted the Commission's case. This pattern occurred across the board with respect to documents and statements submitted not only by Intel but also by third parties. The result was that the Commission dismissed or ignored extensive exculpatory evidence."
The European Union's ombudsman has criticized the antitrust regulator in a recent case against Intel, saying the regulator did not include evidence that was potentially exculpatory for the chipmaker, according to a report in The Wall Street Journal.
In May, Intel was fined 1.06 billion euros ($1.45 billion) for engaging in, according to the Commission, illegal anticompetitive practices to exclude competitors from the market for computer chips based on the x86 architecture--the design that both Intel and Advanced Micro Devices use in their microprocessors.
"Intel has harmed millions of European consumers by deliberately acting to keep competitors out of the market for computer chips for many years," competition Commissioner Neelie Kroes said in a statement at the time.
The investigation was driven by complaints from rival AMD.
The ombudsman, P. Nikiforos Diamandouros, chided the Commission for "maladministration" by not formally citing an August 2006 meeting between Commission investigators and a senior Dell executive, according to the Friday report in the Journal. The Dell executive was providing evidence in the case and "is believed to have told investigators that Dell viewed the performance of Intel rival Advanced Micro Devices Inc. as 'very poor,'" according to the report.
The Journal report concludes that this "could imply that Dell chose Intel chips for technical reasons, rather than because it was muscled into doing so." This would contradict the formal EU decision that claimed that PC manufacturers bought chips from Intel strictly because they did not want to forfeit hefty rebates from Intel.
The ombudsman cannot change the outcome of the case, according to the report.
Intel did not comment.
The Intel-Advanced Micro Devices rivalry spans decades. But in a phone interview last week, the top lawyer at AMD discussed critical moments when the competition with Intel got particularly nasty.
Tom McCoy, AMD's senior vice president of legal affairs, cited two critical junctures in the Intel-AMD rivalry when Intel turned up the heat and, he claims, violated the law.
Tom McCoy
(Credit: AMD)McCoy said the first major assault from Intel came in 1999, when AMD launched the Athlon architecture. "When we go back and we look at all the anecdotal incidents of Intel violating the law, they always center on when we're coming to market with our new-generation technologies," he claimed. "They did it when we came to market in 1999 with the Athlon."
It happened again in 2003, McCoy alleged. "And they did it big time when we came to market in 2003 with the Opteron processor for the server and the Athlon 64 processor," he said. "We had the integrated memory controller, the HyperTransport, we were focused on energy efficiency," McCoy said, referring to two key AMD processor technologies.
"And Intel was caught years behind. That's when they really got out of control," McCoy asserted.
In reference to the European Commission decision to fine Intel $1.45 billion he said: "We don't care about the fine. That's simply consumer harm. What's important to us is the injunction. The decision carries with it an immediate injunction. To stop doing things that are illegally foreclosing AMD technology from getting to the market," he said.
Intel had no specific comment. "We do not comment on our commercial relationships," Intel said in response, though a spokesperson offered this general statement: "What is reflected in AMD's claims reinforces what we have been saying all along. The market rewards customers that perform well and acts accordingly when they do not. If Intel technology did not perform well and our product road map was not strong, customers would go elsewhere."
An Advanced Micro Devices executive claims that Intel and Apple cut a deal in 2005 that made Intel an exclusive supplier of processors to Apple, preventing AMD from gaining Apple business.
No AMD CPUs are currently used in Apple computers.
(Credit: Apple)The claim, made in a phone interview with Tom McCoy, AMD's senior vice president of legal affairs, earlier this week, holds that Intel has had a longstanding deal to be Apple's sole supplier of microprocessors. To date, Apple has not used an AMD central processing unit (CPU) in any of its products. Currently, only Intel CPUs populate Apple's laptop, desktop, and server lineups.
This assertion by AMD comes in the wake of the EU decision last week to fine Intel $1.45 billion for violating antitrust legislation. Last week's EU decision centered on whether Intel used illegal tactics to deny processor business to AMD at PC makers.
McCoy said that a deal was struck when Apple moved from the PowerPC (IBM-Motorola) chip architecture to the x86 (Intel-AMD) architecture. The transition was announced by Steve Jobs at the Worldwide Developers Conference in 2005.
"They made a deal when they were porting over from PowerPC to x86 as to how much Intel was willing to pay for that port. My guess is that Intel asked for and won exclusivity in return for the help that they gave Apple to port," McCoy said.
McCoy continued: "That deal will not be exclusive forever and when that exclusivity is over, I'm sure they (Apple) will choose on the merits. We'll have a chance to compete for Apple's business when Apple is ready," he said. Intel denies this allegation.
Though McCoy did not make any direct charge of illegal activity regarding such a deal, the assertion is not that far removed from charges made in the July 2005 AMD complaint against Intel. AMD, in that filing, cited Dell, among other examples of exclusive Intel deals with PC makers. "In its history, Dell has not purchased a single AMD x86 microprocessor despite acknowledging Intel shortcomings and customer clamor for AMD solutions, principally in the server sector...Dell has been and remains Intel-exclusive. According to industry reports, Intel has bought Dell's exclusivity with outright payments and favorable discriminatory pricing and service." (Note: Dell, in 2005, offered no AMD-based products, though it does today.)
Whether the deal is exclusive doesn't in itself constitute a legal argument, according to Joshua D. Wright of the George Mason University School of Law, who has written about the EU decision in a blog, "Truth on the Market." "Under Section 2 of the Sherman Act, a plaintiff must show that the exclusive dealing arrangement harmed competition in the form of higher prices, lower output, or reduced innovation," Wright said, responding to an e-mail query.
... Read moreFollowing the European Union's decision to fine Intel for "illegal" business practices, Nvidia is crying foul too, according to a report.
Nvidia CEO Jen-Hsun Huang said Intel's chip pricing is unfair but added that the graphics chipmaker will not seek antitrust action against Intel, according to a Reuter's report.
This is a beef that Nvidia has had with Intel ever since Nvidia's Ion graphics chipset debuted last year. The competitive backdrop is Intel's longstanding vision of a CPU-centric universe versus Nvidia's creed that graphics processing matters more and more in a multimedia-intensive world.
Inside every Acer, Asus, Hewlett-Packard, and Dell Netbook beats an Intel silicon core. Intel supplies both the central processing unit (CPU) and graphics processing unit (GPU)--the latter in the form of the Intel integrated Graphics Media Accelerator.
Nvidia wants in. It maintains that Intel-only Netbooks don't deliver the graphics horsepower that Nvidia graphics silicon can.
Huang said Intel sells an Atom chip by itself for $45, but sells a three-chip set for $25 to lure business away, according to Reuters. "That seems pretty unfair," he said to Reuters.
This accusation by Huang follows the European Commission's decision to fine Intel $1.45 billion for employing "illegal" tactics to compete against Advanced Micro Devices.
An Intel spokesman said that computer makers are free to purchase the Atom chip alone or bundled with other chips. "If you want to purchase the chip set, obviously there is better pricing," he told Reuters.
Updated at 12:45 p.m. PDT: adding AMD statement.
The question of whether Intel engages in abusive market behavior has been answered by the European Commission. Or has it?
CNET News Poll
To recap, the EC said:
"Intel limited consumer choice and stifled innovation by preventing innovative products for which there was a consumer demand from reaching end customers."
And: "Intel gave wholly or partially hidden rebates to computer manufacturers on condition that they bought all, or almost all, their x86 central processing units (CPUs) from Intel. Intel also made direct payments to a major retailer on condition it stock only computers with Intel x86 CPUs. Second, Intel made direct payments to computer manufacturers to halt or delay the launch of specific products containing a competitor's x86 CPUs and to limit the sales channels available to these products."
Advanced Micro Devices enthusiastically joins the EC decision, which may "open the floodgates" for civil suits, according to reports. (The fine is paid to the European Commission, not the company that allegedly suffered the damage.)
Though AMD has made it clear that "focusing on the current market dynamics misses the fundamental point of the EC findings" (the period in question for the EU decision is October 2002 through December 2007 and covers servers, desktops, and mobile), looking at current competitive dynamics between Intel and AMD does serve to show that there may be other factors in play.
Intel, for instance, usually takes between 85 percent and 90 percent of the total mobile market share, (though AMD did gain some ground in the first quarter of this year, according to IDC) and Intel virtually owns the newest mobile segment--Netbooks, where AMD is not even a player, by its own choice.
Intel mobile processors usually best AMD mobile processors in benchmarks and power efficiency, and this is validated by Intel's standing at first-tier PC suppliers, where AMD is conspicuously absent or barely present in many mobile lineups.
So, are AMD processors absent or underrepresented because of Intel's alleged big stick, or for other reasons? Apple uses no AMD processors. But Apple prides itself on calling the shots--and is certainly Intel's equal in market power. (No Intel stickers and no Intel market development funds for Apple). And it's safe to say that brass-knuckles negotiating is certainly not a tactic exclusive to Intel. (Remember, Apple dumped Intel graphics silicon in favor of Nvidia in the newest MacBooks).
And other first-tier PC makers like Sony and Dell offer (or have offered) only a few AMD-based laptops. Is this because Intel is a bully or does it have more to do with AMD's competitive standing?
Best Buy statistics underscore this lopsidedness. The largest retailer in the U.S. currently lists on its Web site 81 Intel-based mobile SKUs (models) and only 13 models that use AMD processors.
Finally, remember that we're not including graphics chips from AMD's ATI unit. These chips compete for desktop and laptop circuit board real estate with Nvidia and Intel's integrated graphics silicon.
Advanced Micro Devices is flying the European Union flag on its home page. A little gloating going on?
And if the image doesn't convey the message, the caption does: "European Commission finds Intel guilty of breaking antitrust laws, harming consumers."
AMD's current home page flies the EU flag
(Credit: AMD)That's not all. AMD's Break Free page is a treasure trove of information on the EU case and Intel's alleged bad behavior. "Read the European Commission's Press Release Detailing its Ruling Against Intel" and "Read the European Commission's Questions and Answers Detailing its Ruling Against Intel"--are a few of the selected readings.
AMD likes to say that it spearheaded the movement to dual-core processors (quoth AMD: "without AMD there would be no price pressure on Intel, dual-core processors would still be a year away"--quoting a 2006 media report on its Break Free site) and out-innovated Intel in the server market in the 2004 to 2006 time frame.
So, the first AMD 32-nanometer processor is due when exactly?
Updated on May 14 at 2:40 p.m. PDT with additional comments from AMD.
The chip choices that Dell has made for its business PC line provide some insight into the challenges facing Advanced Micro Devices in the wake of the European Union ruling Wednesday against Intel.
Dell has no AMD-based laptops in its corporate line
(Credit: Dell)"At this point in time we have one AMD desktop but no AMD notebooks," Darrel Ward, director of product management for Dell's business client product group, said in a phone interview Wednesday on a topic unrelated to the EU case. "If you talk to us a year from now, it's probably going to be different. What we try to do is optimize our portfolio based off where we see demand and where we can get the best ROI (Return On Investment) for our engineering dollars."
So, is Dell involved in some venal backroom dealings with Intel in order to box out AMD? We don't know the answer to that question, but most likely not. Dell is simply trying to provide what it considers to be the best systems for its customers.
AMD's 2001 complaint to the EU and subsequent 2005 antitrust lawsuit against Intel have propelled many of the allegations against Intel. And AMD's argument has been made abundantly clear via the EU decision: that is, Intel is leveraging its dominant market position in an illegal manner to exclude competitors from the PC processor market.
But what about AMD competitiveness? And, as a corollary, why do vendors like Dell choose Intel over AMD?
"In part it's because Intel's manufacturing is so superb," said Dan Hutcheson, CEO and Chairman of VLSI Research, a marketing research firm. "And the fact that Intel has such huge economies of scale. That's been one of their big advantages."
Hutcheson said that many companies have tried to take on Intel over the years and failed--but not necessarily because Intel behaved in an illegal manner. "Transmeta said they were going to knock Intel out with the foundry (factory) model. And then there was Cyrix," Hutcheson said. "We've just had dozens of companies over the years that said they would be more cost effective (than Intel). AMD is the only one that's come close."
AMD's struggle to gain market share isn't rooted so much in Intel's behavior but AMD's own strategies. "I'm not quite sure how much of AMD's bad luck over the last few years can really be traced to Intel's behavior," said Charles King, Pund-IT's president and principal analyst. "They've largely missed the burgeoning market in mobile computing because of decisions that they've made. Whatever injury AMD may have suffered due to Intel's rebate and discount programs, the company has really injured itself more severely over that same period of time."
AMD spokesman Drew Prairie had this to say in response to the above discussion about AMD's lack of competitiveness in the mobile PC market. "Focusing on the current market dynamics misses the fundamental point of the EC findings: it doesn't matter how much innovation AMD pours into its products, Intel broke the law to ensure that that PC manufacturers and retailers were not free to base their decisions on which products to bring to market based on the merits of Intel's and AMD's offerings," Prairie said.
