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Intel and AMD announce $1.25 billion settlement

Antitrust Patent

On Thursday, Intel announced that it will pay $1.25 billion to Advanced Micro Devices (AMD) to settle AMD’s antitrust complaints in the U.S., Europe, Japan and South Korea. According to the terms of the settlement, Intel agreed to refrain from engaging in tactics involving computer manufacturers that would exclude AMD from the microprocessor market. The companies also resolved to drop their patent dispute and enter into a five-year cross licensing agreement.

The NY Times provides an overview of the settlement and other information about Intel and AMD. Ars Technica provides strategic analysis; the WSJ Law Blog provides opinions of antitrust experts and PCWorld provides additional commentary.

The settlement is the latest development in a dispute between Intel and AMD that has spanned more than two decades and has involved 200 million documents and 2,200 hours of witness depositions. AMD had accused Intel of rewarding computer manufacturers that use Intel chips exclusively while penalizing those who buy products from AMD, a violation of the Clayton Antitrust Act, 15 USC 14. Intel refuted these accusations and has repeatedly denied that it engaged in illegal tactics to exclude AMD from the microprocessor market. Market leader Intel supplies 70-80% of all PC microprocessors; AMD is a distant second and supplies the remaining 20-30%.

News of the settlement was met with some surprise in the business world, although the companies claim to have been conducting dispute resolution meetings since April. The substantial amount of money that Intel has agreed to pay AMD may indicate the company’s unwillingness to risk a loss at trial. Such a loss could have required Intel to pay treble damages under 15 USC §§ 12–27; this amount plus the additional legal fees accumulated at trial could have cost Intel much more than the settlement amount.

The chance of an FTC suit against Intel is somewhat diminished in light of the settlement agreement, as AMD historically has been a significant agitator for government antitrust action. However, the settlement does not cover many of Intel’s business practices, including Intel’s broad pricing policies and its marketing payments to PC makers. The FTC has been investigating Intel business practices for the past year, though it has not yet filed a complaint against the company. Intel is currently appealing a $1.45 billion fine that was imposed by the European Union last May. Betanews reports that a spokesman for the European Commission has recognized the AMD settlement but has made clear that the Commission is going forward with its antitrust investigations. In addition, New York Attorney General Andrew Cuomo recently filed a wide-ranging antitrust suit against Intel. The AMD settlement therefore is not the end of Intel’s antitrust battles.

The settlement will help AMD address $5 billion of debt resulting from recent business acquisitions and reorganizations. Intel needs AMD to stay competitive to balance its market domination and to counter further antitrust and monopoly concerns. This settlement may represent a win-win resolution to one of the computer industry’s most bitter legal battles.