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Competition Policy in a Global Market

AMD v. INTELPresented by

Lucy Cradduck LLB, LLM (TechLaw), Solicitor

QLS European Perspectives on Law ConferenceParis, 17-19 October, 2007

Session 8

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“It is not enough to succeed. Others must fail.”

Vidal, Gore US author & dramatist (1925 - )

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Competition PolicyFocus on protecting competition not

competitorsSuccessful competition can result in

damage to competitors ‘Aggressive’ competitive behaviour may be

acceptable but anticompetitive behaviour is prohibited or regulated

Underlying rationale of policies vary – i.e. economics plays a much greater role in

competition policy in the US than in AustraliaProhibited conduct similar not same

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What is all the fuss about?

AMD v INTEL

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Presentation Overview

A little bit of history Issues Relevant Laws Complaints Current US action The Australian perspective Presentation context

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A little bit of historyIntel Corporation (‘Intel’)

– Founded in 1968– Initial focus on development of ‘integrated circuit

memory device’ and ‘dynamic random access memory’

– First microprocessor was the 4004– 1970’s: began working collaboratively with clients– 1980’s: IBM selection of Intel chip architecture for

its PCs – focus now on PC market– 2003 - 2005 increased competition from AMD– 2006: collaboration with Skype– 90% of chip revenue globally (allegedly)

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A little bit of history, contAdvanced Micro Devices, Inc (‘AMD’)

– Founded in 1969– 1970: introduces first proprietary device: Am2501

logic counter – Initial focus on development of ‘integrated circuit

memory device’ and ‘dynamic random access memory’

– 1982: agrees to be secondary source for IBM re Intel’s x86 chips under a Technology Sharing Agreement (‘TSA’)

– 1999: first AMD x86 chip with Intel – the Athlon microprocessor

– 2003: introduced Opteron microprocessor for servers– April 2005: AMD named “Processor Company of

2005”– 10% of chip revenue globally (allegedly)

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A little bit of history, cont

NB – figures refer to number of PCs sold not revenue

Source – Advanced Micro Devices, Inc and Anor v Intel Corporation and Anor Civil Action No.05-441-JJF, United States District Court for the District of Delaware, Complaint filed 27 June 2005 - paragraph 25

A global market -

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A little bit of history, cont

Previous ‘disagreements’ between AMD and Intel- Re TSA

1982: dispute re Intel’s failure to share information re 80286 chip

1984: dispute re 80386 chip 1987: arbitration re TSA

1992 – arbitration award of $10 mil to AMD 1994 – Californian Supreme Court upheld award

Re Intel’s 287 Microcode 1990: Intel alleged copyright infringement by AMD’s 80C287

code 1992: jury verdict in Intel favour 1993: new trial ordered (AMD application) 1994: jury verdict in AMD favour

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A little bit of history, cont Antitrust allegations by AMD against Intel

1991: AMD filed complaint

Re Intel’s 386 Microcode 1991: Intel alleged copyright infringement by AMD’s 80C386

code Non-issue subsequent to AMD’s success in 287 Microcode

litigation

Intel Business Interference litigation 1992: AMD alleged tortious interference with economic

advantage – violation of Unfair Comp. Act (Cal.) Action stayed

1995 – global ‘settlement’ of claims regarding conduct occurring before 6 January, 1995

1997 – trademark infringement alleged by Intel against AMD – settled

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A little bit of history, cont

Principles for Responsible Business

“Intel encourages competition, which benefits consumers by prohibiting unreasonable restraints on trade. Intel competes vigorously while at the same time adhering to both the letter and spirit of antitrust laws.”

http://www.intel.com/intel/finance/prin_resp_bus.htm (viewed 05/09/2007)

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A little bit of history, cont

Intel Code of Conduct May 2, 2007

“To adhere to antitrust laws, we must not:– Communicate with any competitor relating to

price, any term that affects pricing, or production levels,

– Divide or allocate markets or customers,– Agree with a competitor to boycott another

business, or– Put inappropriate conditions on purchases or

sales.”http://www.intel.com/intel/finance/docs/code-of-conduct.pdf (viewed 05/09/2007)

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A little bit of history, cont

Current concerns regarding “rebate policy” and corporate behaviour

Intel is alleged to be a “monopolist” in the “global duopoly” of microprocessor manufacturing

Albert A. Foer, The American Antitrust Institute letter to US Federal Trade Commission 29 August, 2007 http://breakfree.amd.com/en-us/assets/AAI%20FTC%20Letter%208.30.07.pdf (viewed 4/9/2007)

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Issues

How is conduct regulated when – Occurs across multiple jurisdictions Competition laws and policies are

similar but not the same No one regulator or regulatory

system to monitor, investigate and punish

Availability and scope of private penalties varies

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Relevant lawsEuropean Union

Article 82 EC TreatyAny abuse … of a dominant position within the common market or in a substantial part of it shall be prohibited … in so far as it may affect trade between Member States. Such abuse may, …consist in:

(a) …imposing unfair …prices or other unfair trading conditions;(b) limiting production, markets or technical development to the prejudice of consumers;(c) applying dissimilar conditions to equivalent transactions…thereby placing them at a competitive disadvantage;(d) making the conclusion of contracts subject to acceptance…of … obligations not connected with the subject of such contracts.

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Relevant laws, cont

South Korea

Monopoly Regulation and Fair Trade ActArticle 3.2 – prohibits a “market-dominating

enterprise” from –• Price maintenance• Controlling the sale of service• Interfering with the business activities of others• Impeding the participation of new competitors• Acting to exclude competitors or harm the

interests of consumers

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Relevant laws, contUnited StatesSherman Antitrust Act 1890 prohibits -

Sec. 1 – “Every contract, combination …or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations…” Sec. 2 – Monopolizing or attempting to monopolize “…trade or commerce among the several states, or with foreign nations…”

Clayton Act Antitrust Act 1914Sec. 4 – a successful plaintiff may recover “…threefold the damages by him sustained, and the cost of suit, including a reasonable attorney's fee…”

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Relevant laws, cont

Japan

Antimonopoly ActArticle 3 – “No entrepreneur shall effect private monopolization or unreasonable restraint of trade”Article 6 – “No entrepreneur shall enter into an international agreement or an international contract which contains such matters as fall under unreasonable restraint of trade or unfair trade practices.”

Unofficial English translation - http://www.jftc.go.jp/e-page/legislation/ama/amended_ama.pdf (accessed 14/9/2007)

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Complaints

European Union

South Korea

United States

Japan

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Complaints, cont

European UnionEC Statement of Objections - EC Press Release MEMO/07/314 Brussels, 27 July 2007

2001: EC commenced investigation (includes German action)

June 2004: raids across Europe by various competition regulators

12 July 2005: raids by EC27 July 2007: Statement of Objections served on

Intel10 weeks for Intel to respond (i.e. by 5 October 2007)

NB Response not available at time of provision of powerpoint slides to QLS (28/9/7)

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Complaints, cont

South KoreaSouth Korean Fair Trade Commission

– Violations of antitrust regulations– 11 Sept. 2007 - Statement of Objections

served –• "the results [of the investigation] are about

suspicions over Intel's abuse of its dominant market power in Korea.“ KFTC official Kim Sung Man

– Allegations to be reviewed by the full Fair Trade Commission

• Adverse decision subject to Court review

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Complaints, cont

United States

Advanced Micro Devices, Inc and Anor v Intel Corporation and Anor Civil Action No.05-441-JJF, United States District Court for the District of Delaware

– Commenced June 2005– Allegations that Intel and Intel KK (Japan) engage in conduct

violating the Sherman Act (by illegally abusing its monopoly position to exclude and limit competition) and the California Business and Professions Code by-

• Discriminatory discounts• Rebates • Interfering with prospective business advantages of AMD

– Subpoenas issued for third party discovery – includes Microsoft, Skype

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Complaints, cont

Japan Japan Fair Trade Commission recommendation decision to Intel Kabushiki Kaisha (8 March 2005)

– IKK “made the five major Japanese [operating equipment manufacturers] refrain from adopting competitors’ CPUs …by making commitments to provide …rebates and/or…[market development funds]…”

– Breach of Article 3 Antimonopoly Act

AMD Japanese Subsidiary v Intel Kabushiki Kaisha (2 actions) -

– Seeking civil damages arising from the breaches of the Antimonopoly Act

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Complaints, cont

A comparison

Start

Jurisdiction

Instigator

Conduct Status

1984 USA AMD Various 1995 Settlement

2001 EU EC (2000 - AMD complaint)

Unfair business practices

27/7/7 – SO sent - Ongoing

8/4/4 Japan JFTC Abusive conduct re rebates and MDF

8/3/5 – decision became order 31/3/5 - abuse of monopoly power

2005 South Korea SKFTC Abuses of dominant market power

9/2/6 – raids by FTC12/9/7 – statement of objections served

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Complaints, cont

Start

Jurisdiction Instigator Conduct Status

27/6/5

USA AMD Discounts, rebates, interference

Ongoing – trial 2009 Thursday, April 27 at 9:30 a.m.

2005 USA – US District Courts and State Courts

78 class actions

Rebates Consolidated to either MLP Delaware or California - ongoing

30/6/5

Japan AMD Breaches Anti-monopoly Act

16/12/5 – Order made JFTC to hand over docs re its investigations

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Current US actionIssues

Claims relating to conduct outside the USA struck out

Discovery permitted re struck out claims Action also hampered by Intel’s

‘archiving’ policy and ‘preservation’ system

Cost • 36+ Discovery subpoenas and 42+ Class

subpoenas– 11 subpoenas just to Intel

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Current US action, cont

A ‘global’ market? • EU – internal market but with extraterritorial

application if conduct affects internal competition

• USA – market – not defined but not limited other than by FTAIA but subject matter jurisdiction issues can arise

• Sth Korea - internal market but with extraterritorial application if conduct affects internal competition

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The Australian perspective

AustraliaTrade Practices Act 1974

S. 46(1) – “A corporation that has a substantial degree of power in a market shall not take advantage of that power in that or any other market for the purpose of:

(a)Eliminating or substantially damaging a competitor…(b)Preventing the entry of a person into that or any other

market;(c)Deterring or preventing a person from engaging in

competitive conduct in that or any other market…”

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The future

How do we get there? Co-operation of enforcement

agencies• Detection and prosecution of cartels

Harmonisation of laws• “One law”?• International treaties - trade• Bilateral agreements

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The future, cont

• Issues impacting on co-operation– Prohibited conduct similar but not the

same

• Issues impacting on harmonization– (ab)use of trade power by more

developed nations to force agreement– No distinction between hard core

cartel behaviours and beneficial agreements

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The future, cont

• Other – Conflict between copyright laws (TPMs) and

competition laws• Absolute and State protected monopolies will

impact on the effectiveness of competition laws

– Foreshadowed changes to EC Treaty – removal of words “free and unfettered competition” from Objects

– USA Antitrust modernization commission report

– AMD’s current alliances

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Presentation context PhD Candidate: Information Security Institute,

QUT, Brisbane, Australia Thesis title: “Technological Protection Measures:

A Cartel for Anti-competitive practices” Research context: How can “…competition law

rectify or ameliorate the real or potential excesses of the enforcement of digital rights management schemes?”

Research is part of ARC Discovery Grant on “The use of information and cryptographic technology to restrict competition” - Chief Investigators are Prof. Bill Caelli, Prof. Stephen Corones and Dr. Adrian McCullagh

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Merci!

Comments, thoughts or suggestions welcome.

Please email tol.cradduck@student.qut.edu.au