Intel, AMD settle antitrust suit, but government lawyers lie in wait
Friday, November 13, 2009
The world's two biggest chipmakers, whose Silicon Valley headquarters are separated only by a few miles, have put an end to one of the high-tech industry's longest and costliest legal battles.
But Intel's agreement to pay Advance Micro Devices $1.25 billion to drop multiple lawsuits Thursday won't stop investigations by U.S. and European antitrust watchdogs. The regulators are investigating allegations Intel used bribes and bullying tactics to maintain its dominance in the highly concentrated chip industry.
"Certainly we plan to review the settlement between Intel and AMD in their private litigation," said Federal Trade Commission Chairman Jon Leibowitz. "The FTC has an ongoing independent investigation of Intel's practices so we cannot comment further at this time."
E.U. spokesman Jonathan Todd said the European Commission "takes note" of Intel's settlement with AMD but that it does not change Intel's duty to comply with European antitrust law. The E.U.'s competition bureau fined Intel a record $1.45 billion for alleged anticompetitive practices. Intel is fighting the fine on an appeal.
Last week, New York Attorney General Andrew M. Cuomo filed a lawsuit against Intel for similar allegations. The complaint included e-mails allegedly showing that Intel agreed to billions of dollars in rebates to computer makers such as Dell to stop them from using AMD's chips.
In a conference call Thursday, Intel chief executive Paul S. Otellini suggested the government probes play little role in the company's decision to settle with AMD. He said the two firms had been in talks for a while to resolve their five-year long legal dispute over competition and patent licensing. The settlement "should provide some degree of comfort for regulators" to allay concerns of anticompetitive practices, he said.
In return for Intel's $1.25 billion payment, AMD agreed to drop antitrust and patent licensing lawsuits, including one in the U.S. District Court of Delaware and two cases that are pending in Japan, Intel said. AMD will also drop its complaints to regulatory agencies, including the FTC, the company said in a conference call.
"While the relationship between the two companies has been difficult in the past, this agreement ends the legal disputes and enables the companies to focus all of our efforts on product innovation and development," the two companies said in a statement.
As part of the settlement, Intel and AMD agreed to a new five-year, cross-license pact and will give up any claims of breach from the previous agreement. Intel also agreed to abide by a set of business-practice provisions.
Intel currently dominates the personal computer market by a wide margin. The chipmaker had 82 percent of the market for processors at the end of the third quarter, according to Mercury Research in Cave Creek, Ariz. AMD had 18 percent.
Antitrust lawyer David Balto said regulators shouldn't drop their reviews and suits because of a private settlement.
"This job is not done," Balto said. "Although the settlement may eliminate some barriers, FTC action is necessary to assure long-term relief in this market, that competition is fully restored."
Shares of AMD jumped 218 percent Thursday, closing up $1.16 at $6.48. Intel's stock price remained flat, falling 0.8 percent to end the day down 16 cents at $19.68.