1. 1 Competition Policy in a Global Market AMD v. INTEL Presented by Lucy Cradduck LLB, LLM (TechLaw), Solicitor QLS European Perspectives on Law Conference Paris, 17-19 October, 2007 Session 8

2. 2 “It is not enough to succeed. Others must fail.” Vidal, Gore US author & dramatist (1925 - )

3. 3 Competition Policy Focus on protecting competition not competitors Successful 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 Australia Prohibited conduct similar not same

4. 4 What is all the fuss about? AMD v INTEL

5. 5 Presentation Overview  A little bit of history  Issues  Relevant Laws  Complaints  Current US action  The Australian perspective  Presentation context

6. 6 A little bit of history Intel 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)

7. 7 A little bit of history, cont Advanced 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)

8. 8 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 -

9. 9 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

10. 10 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

11. 11 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) http://www.intel.com/intel/finance/prin_resp_bus.htm

12. 12 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.pdfhttp://www.intel.com/intel/finance/docs/code-of-conduct.pdf (viewed 05/09/2007)

13. 13 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) http://breakfree.amd.com/en-us/assets/AAI%20FTC%20Letter%208.30.07.pdf

14. 14 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

15. 15 Relevant laws European Union Article 82 EC Treaty Any 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.

16. 16 Relevant l aws, cont South Korea Monopoly Regulation and Fair Trade Act Article 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

17. 17 Relevant l aws, cont United States Sherman 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 1914 Sec. 4 – a successful plaintiff may recover “…threefold the damages by him sustained, and the cost of suit, including a reasonable attorney's fee…”

18. 18 Relevant l aws, cont Japan Antimonopoly Act Article 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)http://www.jftc.go.jp/e-page/legislation/ama/amended_ama.pdf

19. 19 Complaints  European Union  South Korea  United States  Japan

20. 20 Complaints, cont European Union EC 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 EC  27 July 2007: Statement of Objections served on Intel  10 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)

21. 21 Complaints, cont South Korea South 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

22. 22 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

23. 23 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

24. 24 Complaints, cont A comparison StartJurisdictionInstigatorConductStatus 1984USAAMDVarious1995 Settlement 2001EUEC (2000 - AMD complaint) Unfair business practices 27/7/7 – SO sent - Ongoing 8/4/4JapanJFTCAbusive conduct re rebates and MDF 8/3/5 – decision became order 31/3/5 - abuse of monopoly power 2005South KoreaSKFTCAbuses of dominant market power 9/2/6 – raids by FTC 12/9/7 – statement of objections served

25. 25 Complaints, cont StartJurisdictionInstigatorConductStatus 27/6/5USAAMDDiscounts, rebates, interference Ongoing – trial 2009 Thursday, April 27 at 9:30 a.m. 2005USA – US District Courts and State Courts 78 class actions RebatesConsolidated to either MLP Delaware or California - ongoing 30/6/5JapanAMDBreaches Anti- monopoly Act 16/12/5 – Order made JFTC to hand over docs re its investigations

26. 26 Current US action Issues  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

27. 27 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

28. 28 The Australian perspective Australia Trade 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…”

29. 29 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

30. 30 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

31. 31 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

32. 32 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

33. 33 Merci! Comments, thoughts or suggestions welcome. Please email to l.cradduck@student.qut.edu.au