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April 3, 2005

Intel will amend anticompetitive practices in Japan

Intel last week reluctantly agreed to amend its business practices in Japan, where the local competition regulator found the company illegally used its market power to squeeze out rival Advanced Micro Devices.

By CBR Staff Writer

Intel KK, the chip giant’s Japanese subsidiary accepts the recommendation of the Japan Fair Trade Commission, issued almost a month ago, though the company does not agree with the facts underlying the JFTC’s allegations and the application of law.

The recommendation requires Intel to cease and desist from practices that the JFTC says distorted competition by requiring OEM partners to buy all or almost all of their chips from Intel in order to secure significant rebates.

We believe the Recommendation’s cease and desist provisions define a workable framework that enables us to continue to provide competitive pricing to our customers, and benefits consumers and the Japanese economy, Intel general counsel Bruce Sewell said.

The JTFC said March 8 that Intel contrary to the public interest, has substantially restrained the competition in the market of CPUs sold to the Japanese OEMs, by acting to exclude Intel’s competitors’ business activities related to the sales of CPUs.

Intel told us in March that the recommendation had global implications, because the Japanese OEMs are global companies. This could have an impact on consumers in many countries, a spokesperson said at the time.

AMD, which stands to benefit from the move, possibly in the form of more revenue from the Japanese market, naturally welcomed the move, but chastised Intel for refusing to accept that it behaved improperly.

Although Intel’s willingness to comply with the JFTC Recommendation is a step in the right direction, it has conspicuously failed to either accept responsibility for its actions or acknowledge that competition is best served when customers and consumers have a choice, chief administrative officer Thomas McCoy said.

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The JFTC said that Intel saw in 2002 that AMD’s market share had risen in Japan from 17% to 22% over two years, and then decided to prevent OEMs from adopting competitors’ CPUs for all or most of the PCs manufactured and sold.

In some cases, Intel made the OEMs adopt Intel in all of their boxes, the report says. In others, the OEMs could buy up to 10% of their chips from AMD and other rivals. In 2003, Intel got its market share up to 89%, the JFTC said.

AMD is keeping up the pressure, and is calling on European regulators, which are already looking into Intel’s business practices, to take note of the Japanese ruling.

Governments around the world must ensure that such anti-competitive actions are not impacting their markets as well, McCoy said.

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