I have to say that this particular comment has been sitting on my back burner for a very long time. But since the AMD/Intel litigation continues, and I had developed some additional ideas, I felt that it was now time to bring this story to light.

In the IT sector, Microsoft is probably the best known antitrust violator - the company was found to have maintained its monopoly power by anticompetitive means.

The US Supreme Court said that an antitrust remedies decree must seek to “unfetter a market from anticompetitive conduct,” Ford Motor Co., 405 U.S. at 577, to “terminate the illegal monopoly, deny to the defendant the fruits of its statutory violation, and ensure that there remain no practices likely to result in monopolization in the future,” United States v. United Shoe Mach. Corp., 391 U.S. 244, 250 (1968); see also United States v. Grinnell Corp., 384 U.S. 563, 577 (1966).

In my judgement, the software giant got off too lightly. For its wrongdoing, Microsoft agreed to comply to a consent decree, which is an agreement between the parties of a lawsuit that a judge - if it’s in the public interest - approves.

But was that real justice? Do we have real, vigorous competition in the OS desktop space today? Clearly not. Little has changed in the intervening years, and compared to the cost of hardware today, Microsoft software is just too expensive.

AT&T was another company that had abused its monopoly position. The AT&T antitrust case is a good example of a court that delivered justice. AT&T was broken up, which created competition that not only lowered prices but has improved customer service as well.

The complaint against Intel
Intel has vast sums of money that it uses to influence the IT market. Advertising is one of them. Another is the company’s market development funds. The chip giant also uses rebates as well.

When AMD filed its 2005 antitrust complaint against Intel, some of what was alleged concerned the use of this money.

AMD claimed that Intel coerced important customers such as Dell, Gateway, Hitachi, Sony and Toshiba into Intel-exclusive deals. These deals were apparently closed with the use of outright cash payments, discriminatory pricing or marketing subsidies.

According to AMD, the company’s share of Sony’s business went from 23% in 2002 to eight percent in 2003, and then to zero percent today - today being the date of the filing.

The chip maker also claimed that PC makers and tech partners were coerced into boycotting AMD product launches and promotions.

Apparently, former Intel CEO Craig Barrett threatened the chairman of Acer with “severe consequences” for supporting the AMD Athlon 64 launch. At that time, Acer suffered an unexpected delay of market development funding ($15-$20 million) that Intel was supposed to have paid. As it turned out, Acer withdrew from the September 2003 Athlon 64 launch.

Swinging to the Intel rebate
At general election time in the UK, there are seats that are known as swing seats - like swing states in the US. When the nation votes, the swing polls that were conducted before the electorate cast their votes are usually indicative of who is going to win.

It could be said in the IT world that we have swing companies as well - those that sell a mix of AMD and Intel processor based solutions. In elections, however, it would be totally unethical - and no doubt illegal - to pay the electorate to vote in a certain way. But by using rebates, Intel is able to pay back its customers’ loyalty with cash or other monetary inducements after they’ve sold the company’s product.

I don’t have a problem with Intel rebates being used at the point of sale. But when they’re used to influence the decisions of PC and component vendors, those rebates will ultimately limit competition and end user choice, and hence are the IT buyer’s worst enemy.

Enact what’s already on the record
On November 3 2003, a subcommittee of the US Senate Committee on Governmental Affairs held an oversight hearing that was titled: Mutual Funds: Trading Practices and Abuses that Harm Investors. The subcommittee chairman’s opening statement concluded with six recommendations. I’ve added comments to the fifth recommendation, which highlights the benefit that it could have for buyers of IT and other high cost products:

“Require brokers [IT vendors] who steer customers into a particular fund [IT purchase] to disclose in writing to the customer the compensation that the broker [IT vendor] will receive due to the transaction.”

The subcommittee chairman said about that recommendation: “In Chicago, they call those kickbacks.” [Laughter.]

If the above became law for IT and other high cost products and services, it would show where a vendor’s loyalty lies. In terms of a buying decision that is very important to know. Think about it. You’re not going to buy any product or service from a vendor unless they’re offering you a fair and competitive deal. If they only want to make a sale, which doesn’t deliver to you the best value product or service, because the vendor is going to benefit financially from it, you’re obviously going to take your business elsewhere.

Punitive law can prevent transgression
If that recommendation became law, that would be a step in the right direction. But what is really required is punitive legislation that would prevent a company from ever considering an antitrust act. If a company was stupid enough to break that law then the punishment would be severe.

So why such a tough set of laws? If those laws had been in place in the Microsoft era the software giant would probably have not broken them, and the software market might have turned out very different to what it is today.

It is impossible to turn back the hands of time. But it is possible to have laws on the books that would prevent companies, like Microsoft, from breaking them.

Let’s just suppose that history could be replayed, and those laws had been on the books and Microsoft had broken them. How would the court have punished the company?

1. Microsoft would have lost all of its government contracts - local, state and federal, as it was against the law for these government bodies to do business with an antitrust law breaker.
2.   And since these government bodies would have had to ditch all their Microsoft software and change over to something else, the software giant would have had to assume all changeover costs.
3. On the packaging of all products that Microsoft sold, and any product that contained Microsoft technology, there would be a government warning label, that would say: Microsoft is a convicted monopolist. Do you really want to buy this product? Local, state and federal government no longer conducts business with this company. We recommend that you do the same.
4. Microsoft employees who were aware of this antitrust violation but didn’t report it would face jail time.

This isn’t an exhaustive list. Other punitive measures could be taken. The point being illustrated here is the severity of the law. No one in their right mind is going to want to break it.

If these laws had been in effect in Japan and South Korea, where Intel was found guilty of antitrust wrongdoing, would the chip giant have broken the law if the company would have suffered a similar fate? I don’t think so. The company’s lawyers would have ensured that the chip giant had been positioned well within the boundaries of the law.

This article has focused on how a company should be punished. The actual antitrust legislation would face opposition from those who would want to maintain the status quo. So it’s important that those who would be for this legislation have so much wind in their sails that the opposition wouldn’t have a chance to hole it.

Lobby Congress
I believe that AMD has something to work with here. The company can’t compete with Intel in the advertising/market development fund and rebate stakes, so the chip maker and others should lobby Congress to enact the recommendation and the other points that were outlined.

Of course, any lobbying on Capitol Hill requires a point man who can sell the argument. AMD chairman emeritus Jerry Sanders would seem to be the man for the job. He has the stature and the experience to win the argument. His battles with Intel over the years would certainly prepare him for the war of words on the Hill.

Sanders has always espoused the importance of the customer. If he led that lobbying challenge and went on to win the argument, which later passed that antitrust legislation, it would be Sanders’ greatest IT legacy - not only for those who buy IT, but for AMD as well. X

Check Out
AMD files antitrust complaint against Intel
Senate oversight hearing - PDF