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EC Takes Sides in the Mascara-Smearing Bitch Fight Between Intel & AMD

One wonders whether it matters what Intel says in its defense now that it has been accused of the taint of antitrust

One wonders whether it matters what Intel says in its defense now that the European Commission has finally gone ahead and accused it of the taint of antitrust.

Intel has 10 weeks, until October 8, to present its defense. Then there could be a hearing.

One suspects that the EC's reaction to what Intel says will have a lot to do with how the Court of First Instance in Luxembourg treats Microsoft on September 17, the day it's supposed to hand down its decision in Microsoft's appeal of the EC's 2004 judgment that it too trifled with the antitrust laws to maintain its monopoly.

If the EC gets its ears boxed, that big stick it's carrying could turn into a toothpick. If it's totally upheld, that stick could sprout spikes.

The EC has been investigating Intel on-and-off for seven years and Intel's defenders say that the EC's economists have regarded the case as dicey for the last two years. Judging by the timing, they say, the EC's lawyers wanted to get on the record ahead of the Microsoft decision.

Europe's antitrust authorities, Intel defenders would say, are given to interpreting antitrust laws as being there to protect competitors no matter how many times they utter the sacred word "consumer" over the bones of an alleged antitrust violator - particular a giant American alleged antitrust violator.

Intel stands accused of buying business with rebates and selective discounts used to make OEMs turn their noses up at the whiff of AMD coming in the door asking for a bigger piece of the action. It's also supposed to have cut its server chip prices below cost to keep AMD out of key accounts and got PC makers to pull or delay announcements of AMD design-wins.

Intel claims its pricing policies, which have gotten it in trouble in Japan and Korea also thanks to AMD, are legal and that the discounts weren't intended to exclude its smaller rival. The US Supreme Court has ruled five or six times on discounting since 1986 and Intel claims to stand under that protective umbrella.

But, according to the EC Intel's rebates were "of such a quantity and such an amount that an efficient competitor would be forced to price below cost."

A (pre-Murdoch) Wall Street Journal waded into the discussion Tuesday with a scorning editorial that remarked, "The case against Intel is the latest in a series of EU assaults on successful US technology companies. Brussels apparently is determined that if Europe can't be a global leader in information technology it can at least become that industry's worldwide regulator. If it succeeds, the world is bound to be a less competitive and innovative place - like, well, Europe."

Intel claims its discounts benefit customers and consumers - neither of whom are complaining, Intel says - and wonders how AMD can support its claims considering the market share gains it made when its technology was supposed to be the last word - or even in the last quarter when AMD lost $600 million. It calls AMD a crybaby who whines to mama when things aren't going its way or the market is working the way it's supposed to.

The way AMD tells the story this ruckus is strictly between Intel and the EC. It claims it's not feeding the EC the evidence of Intel's "monopoly tax" and its own "de minimis" market share created despite the low, artificially imposed earnings it's making that it blames on Intel. Nope. The EC got it from the industry and Intel itself during its dramatic dawn raid of Intel's offices last September.

According to AMD, Dell and Toshiba only came around after Japanese authorities in 2005 ordered Intel to stop certain rebates (a description of events Intel would contest), and the EC staged that famous dawn raid and AMD filed suit against Intel. It was the impact of "global scrutiny" not market demand that won AMD old Intel loyalists, according to AMD general counsel Tom McCoy.

AMD wants to see Intel's rebate schemes, worth "tens of billions of dollars," by its calculations, banned.

If Intel loses the EC can fine it up to $3 billion and change, 10% of annual revenues. In Japan, it paid a $50 million fine.

The EC statement of objections also lends, as AMD observed, credence to its suits against Intel in the US and Japan.

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