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Intel Feels Some Heat in Japan

Software giant Microsoft (MSFT) may be getting some company on the hot seat. On Apr. 8, Agents from Japan's Fair Trade Commission raided three of chipmaker Intel's (INTC) offices, including divisional headquarters in Tokyo, in an investigation that sources say is looking into potential anticompetitive practices.

Japanese commission agents spent the day poring over Intel documents and interviewing executives, Intel spokesman Chuck Mulloy said from the chipmaker's Santa Clara (Calif.) headquarters. Mulloy said Intel didn't know what prompted the investigation and declined to comment further. "We're trying to cooperate with investigators," he noted.

Rival Advanced Micro Devices (AMD) likely prompted the inquiry. Its executives have complained for years that Intel strong-arms PC makers into using its microprocessors over other offerings. AMD spokesman Morris Denton declined on Thursday to comment on whether the chipmaker has complained to Japanese authorities. But he added: "We support and believe in an environment of open and free competition. Intel is clearly a monopoly, and the company has been investigated continuously for violating antritrust laws in the U.S. and Europe."

RETALIATION? As part of its "Intel Inside" marketing strategy, Intel doles out hundreds of millions of dollars annually to PC makers such as Dell (DELL), Sony (SNE), Hewlett-Packard (HPQ), and Gateway (GTW). Those companies get money based on the number of notebook and desktop PCs they sell with the Intel Inside logo. (HP sells machines with AMD processors as well.) Intel chips power slightly more than 80% of the world's PCs and about 85% of Japan's, according to researcher IDC.

AMD Chief Executive Hector de Jesus Ruiz, in recent interviews with BusinessWeek, has complained that Intel threatened PC makers with retaliation if they supported the April, 2003, launch of AMD's new 64-bit Opteron server chip and the follow-on launch of its 64-bit Athlon 64 desktop processor. Both launch events featured relatively small players, although IBM (IBM), Sun (SUNW), and HP have since agreed to ship some of AMD's new 64-bit chips in their server products.

Despite average selling prices that often are significantly below Intel chips, AMD's share of the global chip market has been static at about 12% over the past three years. "We've been saying for a long time that someone should take a look and realize that the business strategy of our competitor is not in the best interests of customers and partners," Ruiz said in a February interview.

OVER IN EUROPE? Responds Intel's Mulloy: "AMD has been making these kinds of statements for years, despite the fact these claims have been investigated thoroughly by the U.S. Federal Trade Commission twice [1991-93 and 1997-2000] and been found baseless." Indeed, the FTC in 2000 wrapped up a three-year investigation into potential Intel anticompetitive practices without taking action.

In 2001, the European Commission announced that based on an AMD complaint, it would look into similar practices. That investigation hasn't officially concluded. However, Mulloy says the EC "also has notified Intel it's no longer pursuing its investigation of AMD's complaints." Will Japan be the next battleground? By Cliff Edwards in San Mateo, Calif.

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