Earlier this year, the commission said that Intel was doing bad, bad things to push its only rival, Advanced Micro Devices (NYSE: AMD ) , out of competition. This was hurting European consumers, and the commission slapped Intel with a $1.45 billion fine -- large enough to eclipse the nearly $750 million fine it originally imposed on Microsoft (Nasdaq: MSFT ) in 2004. Intel filed an appeal, and now some of the supporting documents of the case are available to the public.
The commission isn't kidding around as it lays some heavy charges at Intel's feet -- and backs them up with what looks like damning evidence. Here, have a taste:
- An unnamed Hewlett-Packard (NYSE: HPQ ) executive, in an email from 2002, wrote that "we are constrained to 5% AMD by pursuing the Intel agreement."
- Between 2002 and 2005, Dell (Nasdaq: DELL ) would have lost massive Intel rebates if it shipped any systems with AMD inside. So Dell stayed with Intel's "slower, hotter products that cost more across the board in the enterprise with no hope of closing the performance gap for 1-2 years," according to an email from 2004.
- Pan-European retailer Media Saturn Holdings, which features 800 stores from Spain to Russia, had a non-exclusive agreement with Intel on paper, but an unnamed executive says that Intel's legal department requested that wording while rebate programs continued to require high percentages of Intel chips sold.
All of this happened back in AMD's Golden Age, when the Athlon was beating the pants off the Pentium 4 and Intel was scrambling to defend its throne.
This salvo of public scorn makes sense when you consider the nature of this case: The commission is defending a record-breaking $1.45 billion penalty and could come out looking ridiculous if Intel manages to overturn the charges.
And of course, Intel is doing its best to counter the commission's attacks. In a written statement, the company calls this decision "wrong -- both factually and legally." Intel slams the commission's "prosecutorial bent" and says that with this mindset, facts that would support Intel's position may have been ignored and many ambiguous statements interpreted in AMD's favor.
For example, Intel says, "the Commission relied heavily on emotional exchanges and speculation found in emails if they favored the Commission's case." Intel specifically points to the commission relying on speculation from a lower-ranked employee, while it in turn points to evidence that all customers covered by the commission bought from AMD during 2002-2007, and none of them suffered disproportionate rebate reductions.
What does it all mean?
I am not a lawyer, nor do I play one on TV. Hence, it is not my place to say who's right and who's wrong in this scuffle.
But I can tell you that the final outcome is vital to the entire computer industry.
For AMD, the European decisions so far are setting up a fine framework of international precedents, and AMD could draw support from this in the case that really matters. That would be the antitrust suit in U.S. federal courts, where Intel might end up paying damages straight to AMD rather than to a faceless commission.
Intel obviously wants to keep or reclaim its cash. The company is big and rich enough that it can easily afford several billions of dollars in fines before taking any real damage. But that's hardly ideal, and investors don't like to see money going out the door.
Painting the big picture
On a grander scale, this is just the first of many antitrust cases against Intel. If the chip giant broke the law, then its business practices would need to change -- and probably have done so already. That means more choice for consumers and system builders -- although there are plenty of reasons to choose Intel chips anyway, at the moment. It could spark another all-out price war between AMD and Intel as the two attempt to stake out their territories on technical merits and pricing alone.
Or, Intel could win out in the end and everything will continue as before -- whatever that means.
I am a longtime AMD shareholder and would obviously love to see billions of Intel's dollars flowing into AMD's coffers -- but I also have tremendous respect for Intel and don't believe that it's evil. Competition gets cutthroat and messy in these fierce two-horse races, and Intel may or may not have overstepped the limits of law and good taste.
The AMD-Intel duopoly will remain in any case. It's much like the never-ending cola wars, except that Pepsi (NYSE: PEP ) is a much stronger underdog than AMD ever was. And if AMD wins big, I might just take my profits from the newly rich AMD and invest in Intel, whose shares should be cheap that day.