Intel Defends Against AMD's 'Global Misconduct' Allegations

In a legal document filed yesterday in conjunction with the ongoing antitrust case brought against it by AMD, Intel defended its right not to turn over certain documents regarding its business with customers outside the US.

While much of its defense cites in detail language from Judge Joseph A. Farnan's ruling stating AMD can only seek redress for Intel's alleged exclusionary conduct within the US, Intel added another compelling argument as a backup: that AMD's decision to stop producing CPUs from one of its fabrication facilities in Austin, Texas, took place prior to the time of Intel's alleged misconduct, as framed by the case's own statute of limitations.

As AMD described in its Motion to Compel filed last month, almost two-thirds of AMD's output from Fab 25 in Austin during 2002 and 2003 consisted of processors sold abroad. Most of those processors, AMD claims, were K6 and K7 CPUs. When customer demand for these processors increased worldwide, said AMD, it initially planned to retool the facility for its next-generation CPUs - presumably including its first-generation Athlons.

But sales exclusivity deals that Intel allegedly reached with retailers in Germany, AMD says, forced the company instead not to retool for Athlons, but to pare down its Austin facility for producing flash memory. It didn't have to cite recent analysts' reports about the slowdown in that market, set against the continuing health of the CPU business.

"Intel's foreign misconduct artificially depressed the demand for AMD's products," reads AMD's Motion to Compel, "preventing export sales of Austin-made microprocessors and ultimately leading to AMD's withdrawal from the U.S. export business. Intel's foreign misconduct is as relevant here as it would be to an antitrust claim lodged by a U.S. businessman engaged exclusively in exporting who was driven under by anticompetitive conduct that cost him his foreign customers."

AMD's motion went on to predict that Intel's defense would argue AMD isn't entitled to develop proof of these allegations, in light of Judge Farnan's ruling that US antitrust law doesn't apply to them. Intel was only too happy to oblige, though it didn't need to add much language beyond what the Judge already wrote.

"The Court stated that for AMD's allegations to meet the 'direct effects' requirement of the [Foreign Trade Antitrust Improvements Act]," Intel's Opposition response states, "AMD had the burden to show that effects on U.S. commerce were an 'immediate consequence' of Intel's foreign conduct with 'no intervening developments.' The Court held that AMD had failed to meet that standard because 'AMD's chain of events [was] full of twists and turns, which themselves are contingent upon numerous developments.'"

"The Court reasoned," Intel continues, "that AMD's contention that Intel's foreign conduct affected AMD's investments in manufacturing and opportunities to achieve efficient scale were 'premised on a multitude of speculative and changing factors affecting business and investment decisions, including market conditions, the cost of financing, supply and demand, the success or failure of research and development efforts, the availability of funds, and world-wide economic and political conditions.'"

Intel goes on to cite the Judge's ruling again, in stating that the Sherman Antitrust Act doesn't cover such "ripple effects."

In a statement to BetaNews this afternoon, an AMD spokesperson commented on Intel's response, surprisingly conceding a few points:

"While pending appellate review, that ruling does appear to limit AMD's damage in its U.S. legal case," the spokesperson stated. "[However], it has absolutely nothing to do with the legal and factual merits of the allegations of Intel's misconduct. And it does not stand as a bar to AMD's discovery of evidence that Intel coerced foreign customers from dealing with it, particularly given the harm this foreclosure caused to AMD's export business of selling domestically manufactured processors to foreign customers."

Also in its Motion to Compel last month, AMD made the case that, while the Court had indicated US antitrust law has no jurisdiction over foreign sales, it isn't in the area of foreign sales, specifically, where it was allegedly hurt.

"AMD's claims arise not from sales it consummated," AMD writes, "but from sales Intel's misconduct prevented...Thus, the operative inquiry is not what sales AMD made during the limitations period, but what sales it would have made in the absence of Intel's misconduct."

"AMD's suggestion that Intel conceded that this claim is proper is simply wrong," Intel writes in response to this contention. "More importantly, AMD's moving papers demonstrate that whether and to what extent AMD chose to keep Fab 25 functioning as a microprocessor manufacturing facility was on its face a highly complex decision that was dependent on a number of intervening events."

One of those events, Intel notes, was a half-billion-dollar investment in retooling Fab 25 for new copper interconnection technologies that AMD's new CPUs would require. Its Fab 30 facility in Dresden, Germany, was already built for those technologies.

Later, though, Intel goes for the big play, alleging that AMD's claims are effectively out of bounds. "AMD concedes that the statute of limitations began to run no later than June 26, 2001, four years before AMD filed its Complaint," Intel writes. "But AMD's decision to convert Fab 25 to a flash memory facility was made at least two months before that date."

To back up its claim, Intel cites a comment made during an AMD quarterly conference call in April 2001, during which then-chairman and CEO Jerry Sanders said for the record that AMD plans to convert Fab 25 into a flash memory facility "over time," before adding that it had a separate plan for Athlon and Duron production. That statement was later summarized in an AMD press release, which Intel also cited.

Finally, Intel relies on existing law to establish a differentiation between monopoly power and exclusionary practices, saying that AMD cannot legally pursue both claims with one discovery. "Whether a defendant has monopoly power is recognized as a separate and distinct inquiry," Intel writes, "from whether that defendant has engaged in exclusionary or anticompetitive conduct; evidence of one is no substitute for evidence of the other."

AMD's spokesperson commented today to BetaNews, "Intel has good reason to attempt to resist foreign discovery: its desire to keep a U.S. jury from seeing the evidence of Intel's global misconduct, and how that has injured customers in the United States." Believe it or not, the case is not set to begin formally until April 2009.