The European Union is increasingly becoming the arena where U.S. tech companies fight their antitrust battles. The latest case in point is Sunnyvale (Calif.)-based Advanced Micro Devices (AMD). Days after a U.S. court set AMD back in a suit accusing Intel (INTC) of abusing its dominance of the semiconductor market, European antitrust authorities moved closer to taking formal action against the chip giant.
Press reports say the European Commission is in the final stages of preparing a formal complaint against Intel, known in bureaucratic parlance as a "statement of objections." The news comes more than a year after EU authorities seized documents from Intel offices in Europe (see BusinessWeek.com, 7/14/05, "The EU's Assault on Intel"). Antitrust enforcers were acting on AMD's assertion that Santa Clara (Calif.)-based Intel provided financial incentives or used strong-arm tactics to keep PC makers from building computers with AMD chips and to discourage retailers from selling AMD-based machines.
Neither Intel nor AMD would confirm that European Commission action is imminent, and a Commission spokeswoman also declined to comment. "We believe our business practices are fair and lawful," an Intel spokesman says.
MICROSOFT MARATHON. But, in a sign AMD is expecting a development in the case soon, company representatives have in recent days briefed reporters on the background of the case. And it's clear the Commission has emerged in recent years as an aggressive enforcer of antitrust rules.
The most high-profile example is the EC's complex, multiyear case accusing Microsoft (MSFT) of using its dominance of the operating system market to quash competition in the software business. The Commission has already imposed nearly $1 billion in fines on Microsoft, which the Redmond (Wash.)-based company is appealing.
Microsoft's adversaries have joined together under the banner of the European Committee for Interoperable Systems (ECIS), an industry group whose members include Adobe Systems (ADBE), IBM (IBM), Nokia (NOK), Oracle (ORCL), RealNetworks (RNWK), Red Hat (RHAT), and Sun Microsystems (SUNW).
There may be another Microsoft case brewing involving Symantec (SYMC), the maker of Norton security products for PCs and servers. Symantec executives say they have been interviewed several times during the last year by EC authorities who were interested in the structure of the market for software that protects computers from viruses and other online threats.
SIMPLER ISSUE. Symantec has also been briefing reporters recently to argue its case that Microsoft's new Vista operating system, due in a few months, will handicap companies that sell software to compete with Microsoft's own security products (see BusinessWeek.com, 10/3/06, "McAfee and Symantec Confront Microsoft").
So far, though, the European Commission's actions have not seriously challenged Microsoft's dominance of the market for PC operating systems. Would a case against Intel be any different? Maybe. For one thing, the AMD-Intel dispute is far simpler. The cases involving Microsoft revolve around issues of intellectual property and the mind-boggling intricacies of computer code. Even the experts are confused. There is little legal precedent to rely on.
By comparison, AMD's complaint is simply that Intel has used unfair sales practices in the marketplace. Specifically, the No. 2 maker of PC microprocessors argues that the kinds of discount schemes and pressure tactics Intel uses with its customers, though acceptable among normal competitors, are unlawful for a supplier with dominant or monopoly market share.
ALLEGED FREEZEOUT. There is ample precedent for such cases, making it more likely that the dispute will be resolved less glacially than has been the case with the Microsoft action. (For a look at some of the European legal background, see BusinessWeek.com, 7/14/06, "Why Intel Faces an Uphill Slog.") "Our case is much easier. There are no issues of technology," says Riccardo Celli, a partner at law firm O'Melveny & Myers in Brussels, which represents AMD.
While the EU files on the case are not public, many of the key points are contained in a suit AMD is pursuing in the U.S. The suit charges, for example, that Intel representatives threatened to withhold shipments to a German computer retailer, Vobis, that displayed an AMD banner at a trade fair.
AMD also says that Intel has used millions of dollars in financial incentives to freeze AMD products out of Saturn and Media Markt stores in Germany. The two retailers, both part of Dusseldorf-based Metro Group, account for more than one-third of German PC sales. (A spokesman for Saturn and Media Markt declined to comment, while a spokesman for Intel in Germany said the company has not violated any laws.)
Last month, a U.S. federal judge threw out much of AMD's case in a Delaware court, saying the charges were not covered by U.S. law. That action shifts more of the spotlight to Europe.
AMD GAINS MARKET SHARE. The only wrinkle is that despite Intel's alleged anticompetitive tactics, AMD has already been gaining market share in Europe. The gains may partly reflect the threat of EU action, which has emboldened retailers and computer makers to resist Intel. (No computer makers contacted by BusinessWeek.com would comment.)
But AMD's gains are mostly the result of better products, says Eszter Morvay, a research analyst at IDC in London. She notes that AMD beat Intel to market with 64-bit chips for desktop computers and that AMD chips are preferred by consumers who use a lot of graphics-heavy applications. As a result, AMD's share of the desktop market in Europe rose to 20% in the second quarter of 2006 from 18% a year earlier. Intel's share slipped from 82% to 80% in the same period. In laptops, where Intel is more dominant, AMD boosted its share to 12% from 10%.
"I wouldn't relate it to any legal issues that might be going on," Morvay says. Rather, AMD is harvesting the fruit of its improved marketing and technology. In the end, the marketplace is the swiftest arbiter.
Ewing is BusinessWeek's European regional editor
With Arik Hesseldahl
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