Analysts: Proof will be in the papers for Intel-AMD

AMD's antitrust complaint against Intel contains several allegations that while damning, will be tricky to prove, according to analysts.

Until the e-mails emerge, and the executives begin to talk, assessing the chances of Advanced Micro Devices's antitrust lawsuit against Intel is largely academic, industry analysts said Tuesday.

AMD believes that Intel's practice of providing PC companies with marketing dollars in exchange for purchasing certain amounts of Intel chips excludes AMD from competing on the basis of its technology, company executives said in a conference call Tuesday. AMD will attempt to prove in its antitrust case that this behavior harms consumers and competition. The case is expected to start by the end of next year.

Some of the documents produced during the Japan Fair Trade Commission's investigation of Intel's business practices revealed that Intel withheld market development funds from Sony, Toshiba, Fujitsu, and other Japanese PC companies unless those companies agreed to drop AMD from their products. Intel disagreed with the JFTC's interpretation of those business practices and did not admit any wrongdoing, but it did not dispute the validity of the charges.

In its 48-page complaint, AMD also outlined several instances in which market share leaders like Dell and Hewlett-Packard were pressured to maintain or develop exclusive relationships with Intel, or risk the loss of marketing dollars.

Past attempts at pinning anticompetitive behavior on Intel have not succeeded because the world's largest chip maker has been able to compete aggressively without running afoul of antitrust regulations, said Nathan Brookwood, principal analyst with Insight 64.

"Historically, I've always believed that Intel took its obligations as a dominant supplier in the marketplace very seriously. If the AMD claims have any basis in fact, it's going to shake my perspective on this," Brookwood said.

It is no great secret that Intel provides the so-called market development funds -- really just cash payments -- to PC vendors to support marketing activities around new chips or new technologies, said Roger Kay, vice president of client computing at IDC in Framingham, Massachusetts.

The specific details of the program are not as well known, but Intel essentially rewards PC companies for including key marketing messages in their advertisements around concepts such as Intel's Centrino mobile technology. The funds can sometimes account for more than half of a company's marketing budget for a specific product, Kay said.

AMD will attempt to show that these market development funds are also dependent on maintaining an exclusive relationship with Intel, or fulfilling a quota for a certain amount of Intel chips. This could be trickier than just producing documents and evidence about "suspicious-looking behaviors" on the part of Intel, Kay said.

"In a market where there is competition, which supplier is not going to offer some kind of benefit [to its customers] if they are prepared to commit to some kind of exclusivity?" said Brian Gammage, a vice president with Gartner.

In order to establish that Intel is being "anticompetitive," rather than merely competitive, AMD needs to demonstrate that consumers have been harmed by Intel's practice of selectively distributing market development funds, said Shawn Parrish, managing partner of Morgenstein & Jubelirer.

"This can be shown by proving that the principal benefit to Intel from these practices derives from their propensity to frustrate or eliminate competition and not some other legitimate purpose," Parrish wrote in an e-mail interview. "Generally speaking, the courts assume that consumers are harmed by lessened competition, because this means Intel will have even greater market share and, possibly, a greater ability to raise prices. This can be proven by documents and testimony from the companies, as well as through the testimony of expert economists, who will argue about whether the conduct really does nothing other than injure competition or whether there are other legitimate justifications."

(Peter Sayer in Paris contributed with this story.)

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