In the tech world, it's not just about building products. It's also about using the legal system. That's what chip maker Advanced Micro Devices (NYSE:AMD) did yesterday, against its longtime nemesis, Intel (NASDAQ:INTC).
AMD's complaint is well written and, most importantly, hard-hitting. After all, litigation is really a declaration of war.
In the first two pages of its 48-page document, AMD compares Intel to the late 19th- and early 20th-century symbol of abusive market practices, Standard Oil. AMD's document also unleashes a variety of confrontational phrases: "forced customers," "threatened retaliation," "established and enforced quotas," "abused its market power," and so on.
This fight is very important in terms of how it could shape the industry. After all, it is not automatically illegal for a company to have a monopoly. Yes, Intel has 90% of the world's market (in terms of revenues) for its microprocessors, but there's nothing wrong with being successful. What the law forbids is a monopoly engaging in anticompetitive acts.
If history is any guide, it's difficult to prove that a company is engaging in such acts. So AMD is helping its cause by citing what other companies have allegedly said about Intel's suspected behavior: Gateway (NYSE:GTW) execs are reported to have said they would be beaten into "guacamole" if their company did business with AMD; Toshiba dropped AMD because Intel's financial inducements "amounted to 'cocaine'"; the former CEO of Compaq (which is now owned by Hewlett-Packard) indicated that Intel had a figurative gun to his head; and so on. In all, the complaint lists 38 companies -- including Sony (NYSE:SNE) and Motley Fool Stock Advisor selection Dell (NASDAQ:DELL) -- that AMD believes are the victims of what it calls Intel's "old-fashioned threats, intimidation, and knee-capping."
So we find ourselves confronted with a fundamental issue -- ethics versus the law. At what point do aggressive business practices become antitrust violations? It will be up to the court to decide whether the defendant has crossed the line.
A big boost for the plaintiff's case came through a recent ruling from Japan's Fair Trade Commission, which warned Intel about its practices. Apparently, Intel offered rebates to five major Japanese PC makers to use its chips.
No doubt, AMD has done a tremendous job in terms of building quality products and has made inroads into Intel's dominant position. But the antitrust suit will be expensive and time-consuming. It will take a least a year until the case even goes to trial. And it is highly unlikely that Intel will settle against such charges from AMD. It will level a strong legal response.
Thus, in the meantime, AMD will need to find ways to grow its business. And Intel will, of course, find ways to exploit any signs of weakness.
Fool contributor Tom Taulli does not own shares of companies mentioned in this article.
