Free Complaint - District Court of Delaware - Delaware

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE

JEROME FEITELBERG, on behalf of himself and all others similarly situated,
Plaintiff,
v.

Civil Action No.

CLASS ACTION COMPLAINT
JURY TRIAL DEMANDED

INTEL CORPORATION,
Defendant.
Plaintiff Jerome F eitelberg, by and through counsel, on behalf of himself and all

others similarly situated, brings this action against Defendant Intel Corporation ("Intel")

for damages, and demands tral by jury, complaining and alleging upon information and
belief as follows:

NATURE OF THE ACTION
1.

This action concerns Intel's anticompetitive and monopolistic practices in

the conduct of trade or commerce, specifically those acts and practices that it intended to use, did use, and continues to use to prevent and destroy competition and acquire and/or

maintain monopoly power and raise prices to supra-competitive levels in the market for

microprocessors that ru the Microsoft Windows and Linux familes of operating systems
("the x86 Microprocessor Market").
2.

Intel dominates the x86 Microprocessor Market, with greater than an

80 percent market share as measured by unt volume and greater than a 90 percent market
share as measured by revenue. It has engaged in a series of anti

competitive acts that

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were designed to, and did, eliminate competition and prevent entry in the x86
Microprocessor Market.
3.

Intel has used its monopoly power to injure consumers, by charging supra-

competitive prices for its microprocessors, which supra-competitive prices were passed
on to consumers, and by reducing the pace and quality of innovation.
4.

Plaintiff, on his own behalf and on behalf of the class defined below, seeks

to recover for the injuries to his business or propert resulting from his overpayments for
Intel microprocessors. Plaintiff also seeks injunctive and declaratory relief and costs,
including reasonable attorneys' fees.

JURISDICTION AND VENUE
5.

The Cour has jurisdiction pursuant to 28 D.S.C. § 1332( d), in that this is a

class action in which the matter or controversy exceeds the sum of $5,000,000, exclusive
of interest and costs, and in which some members of

the proposed class are citizens ofa

state different from the defendant.
6.
is subject to personal Venue is proper pursuant to 28 U.S.C. § 1391

(a) because Intel resides and
the

jurisdiction in this District and because a substantial part of

events or omissions giving rise to the claims occurred in this District.

PARTIES
7.

Plaintiff Jerome Feitelberg is a resident of Alameda, Californa. During

the relevant time period, Plaintiff purchased a Dell computer that contained an Intel
microprocessor.
8.
place of

Defendant Intel Corporation is a Delaware corporation with its principal

business in Santa Clara, Californa. It conducts business both directly and

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through wholly-owned and dominated subsidiaries worldwide. Intel and its subsidiaries
design, produce, and sell a wide variety of microprocessors, flash memory devices, and
silicon-based products for use in the computer and communications industries.

CLASS ALLEGATIONS
9.
Plaintiff brings this action under Federal Rule of

Civil Procedure 23(b)(3)

on his own behalf and on behalf of the following Class:

All individuals and entities located in the United States that purchased a microprocessor indirectly from the defendant, or any controlled subsidiary or affiliate thereof, in one of the Included States (defined below), at any time during the period from July 12,2001 to the present (the "Class Period"), other than for resale. The Class excludes the defendant and its agents, subsidiaries, affiliates, offcers, directors, and employees. The Class fuher excludes governent entities, the judge presiding over this case, and the judge's immediate family and staff.
10.
For puroses of

the Complaint and class definition, the "Included States"

are Alaska, Arizona, Arkansas, California, the District of Columbia, Florida, Idaho, Iowa,

Kansas, Maine, Michigan, Montana, Minnesota, Mississippi, Nebraska, Nevada, New
Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, South
Dakota, Tennessee, Utah, Vermont, West Virginia, and Wisconsin.
11.

Plaintiff does not know the exact number of class members because such

information is in the exclusive control of Intel and third paries. However, due to the
natue ofthe trade and commerce involved, Plaintiff believes that the members of

the

Class are suffciently numerous and geographically diverse that joinder of all members of
the Class is impracticable. Fed. R. Civ. P. 23(a)(1).
12.

There are questions of law and fact common to the Class, including but

not limited to the following:

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a.

Whether Intel engaged in anticompetitive conduct that renders it liable to the Class under state antitrust and consumer protection laws;
Whether Intel possessed monopoly power in the relevant market;

b.
c.

Whether Intel acquired or maintained monopoly power within the relevant market through anticompetitive activity; and

d.

Whether Intel's unawfl conduct has caused legally cognizable
injur to Plaintiff and the Class by enabling Intel to increase,

maintain, or stabilze above competitive levels the prices that Plaintiff and Class members have paid for x86 microprocessors, and if so, the appropriate class-wide measure of damages.
13.

These common questions and others predominate over questions, if any,
the Class. Fed. R. Civ. P. 23(a)(2) and 23(b)(3).

that affect only individual members of

14.

Plaintiff's claims are typical of, and not antagonistic to, the claims of

the

other Class members because Plaintiff, by advancing his claims, wil also advance the

claims of all members of the Class and because Intel paricipated in activity that caused
members of

the Class to suffer similar injur. Fed. R. Civ. P. 23(a)(3).

15.

Plaintiff and his counsel will fairly and adequately protect the interests of

absent Class members. There are no material conficts between Plaintiff's claims and
those of absent Class members that would make class certification inappropriate. Counsel for Plaintiff are experienced in complex class action litigation, including

litigation involving antitrust allegations, and wil vigorously assert Plaintiff's claims and
those ofthe members of

the Class. Fed. R. Civ. P. 23(a)(4).

16.
resolution of

A class action is superior to other methods for the fair and effcient
this controversy. The class action device presents fewer management
economy of scale, and

difficulties, and provides the benefit of a single adjudication,

comprehensive supervision by a single cour. Fed. R. Civ. P. 23(b)(3).

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17.

Whatever difficulties may exist in the management of the class action will

be greatly outweighed by the benefits of the class action procedure, including but not
limited to providing Class members with a method for the redress of claims that may not
otherwise warrant individual litigation.
INTEL'S MONO

POL Y POWER IN THE RELEVANT MARKT

The Relevant Product Market
18. 19.

The relevant product market is the x86 Microprocessor Market.

A microprocessor, also called a microchip or chip, is an integrated circuit

that contains the entire central processing unt for a computer. Original equipment
manufactuers ("OEMs") use these microprocessors to power the computers that
ultimately are purchased by consumers.
20.

Although other microprocessors, besides x86 microprocessors, are offered

for sale, these other microprocessors are not reasonably interchangeable with x86

microprocessors because none can ru the x86 Windows or LLnux operating systems or
the application softare written for them.

21.

A putative monopolist in the x86 Microprocessor Market would be able to

raise the prices ofx86 microprocessors above a competitive level without losing so many customers to other microprocessors as to make this increase unprofitable. While existing
end-users can theoretically shift to other operating system platforms, high switching costs

associated with replacing existing hardware and softare make this impracticaL. Furher,
the number of

new, first-time users who could choose a different operating system

platform is too small to prevent an x86 microprocessor monopolist from imposing a

meaningful price increase for a non-transitory period of time. Computer manufacturers

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would also encounter high switching costs in moving from x86 microprocessors to other

architectures, and no major computer maker has ever done it. In short, demand is not
cross-elastic between x86 microprocessors and other microprocessors at the competitive
leveL.

The Relevant Geoeraphic Market
22.

The relevant geographic market is worldwide. Indeed, in its July 1998

Answer to a complaint by the Federal Trade Commission, Intel admitted that the relevant
geographic market was the world.
23.

Intel and its competitors in the x86 Microprocessor Market compete

globally. Platform architectue is the same from country to country; microprocessors can
be easily and inexpensively shipped around the world, and frequently are; and the

potential for arbitrage prevents chipmakers from pricing processors differently in one
country than another.

Intel's Monopolv Power in the Relevant Market
24.

Intel dominates the worldwide x86 Microprocessor Market. According to

published reports, over the last several years it has consistently achieved more than a 90
percent market share as measured by revenue. In seven of

the last eight years, Intel has

captued at least 80 percent ofx86 microprocessor unit sales.

25.

Intel's only meaningful competitor in this market is Advanced Micro

Devices, Inc. ("AM"). AM's revenue share has remained at approximately 9 percent,
while its worldwide volume share has hovered around 15 percent, only once penetrating
the 20 percent leveL.

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26.

Another competitor, Cyrx, was acquired by National Semiconductor in

1997, and exited the market two years later. As of

the beginning of2005, only two other

x86 chipmakers remained - Via Technologies, Inc. and Transmeta Corporation.

Transmeta has since anounced its intention to cease sellng x86 microprocessors, and
Via has a less than 2 percent market share.
27.

Intel is shielded from new competition by huge barers to entry. A chip

fabrication plant capable of effciently mass-producing x86 microprocessors costs at least

$2.5 bilion. In addition, bilions of dollars in research and development costs would be
required to design a competing x86 microprocessor and to overcome almost
insurountable intellectual property and knowledge bariers.
28.

Intel has reaped huge financial benefits from its monopoly position.

Intel's revenue from microprocessor sales alone exceeded $24 bilion in 2004. In 2003
and 2004, operating margins for the Intel Architectue business, which develops and sells
microprocessors, were approximately 40 percent.

Distribution in the Relevant Market
29.
at

Anual worldwide consumption of x86 microprocessors curently stands

just over 200 milion unts per year and is expected to grow by 50 percent over the

remainder of

the decade. Relatively few microprocessors are sold for server and

workstation applications (8.75 milion in 2004), but these command the highest prices.
Most x86 microprocessors are used in desktop personal computers ("PCs") and mobile

PCs, with desktops curently outnumbering mobiles by a margin of three to one. Of the
total worldwide production of computers powered by x86 microprocessors, 32 percent
are sold to United States consumers.

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30.

The majority of x86 microprocessors are sold to a handful of large OEMs,

higWy visible companies recognzed throughout the world as the leading computer

makers. Nine OEMs - regarded in the industry as "Tier One" - together account for
almost 80 percent of servers and workstations, over 40 percent of desktop PCs, and over
80 percent of

mobile PCs. These "Tier One" OEMs are Hewlett-Packard, which now

also owns Compaq Computer; Dell; IBM, which sold its PC business to Lenovo as of

May 1,2005; Gateway/eMachines; and Fujitsu/ujitsu Siemens. Toshiba, Acer, NEC,
and Sony are also commonly viewed as Tier One OEMs in the notebook segment of

the

PC market. The Tier One OEMs operate on small or negative profit margins.
31.

The balance ofx86 production is sold to smaller system builders and to

independent distributors. The latter, in tu, sell to smaller OEMs, regional computer

assemblers, value-added resellers, and other, smaller distributors.
32.

OEMs sell computers through a variety of distribution channels, including

through the internet, company-employed sales staffs, independent distributors, and retail
chains. Microprocessor manufacturers compete not only to have OEMs incorporate their

products into their retail platforms but also to convince retailers to allocate shelf space so that the platforms containing their respective microprocessors can be purchased in the
retailers' stores.

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INTEL'S UNLAWFUL. ANTICOMPETITIVE ACTIVITIES
Intel's ACQuisition of Monopolv Power
33.

In the early 1980s, IBM defined the original PC standards, choosing

among a variety of microprocessors, including those developed by Motorola, Zilog,

National Semiconductor, Fairchild, Intel, and ADM. IBM opted for the Intel
architecture, which utilzed what became known as the x86 instruction set (after Intel's

naming convention for its processors, i.e., 8086, 80186, 80286, 80386, etc.). IBM
demanded, however, that Intel contract with another integrated circuit company and

license it to manufactue 8086 chips as a second source. AM agreed to abandon its
own, competing architecture, and undertook to manufactue 8086 chips as a second
source of supply.

34.

In February 1982, Intel and AMD entered into a ten-year agreement by

which either company could elect to be a second source for products offered to it by the

other. Under the contract, AM could initially obtain second-source rights to Intel's
8086 chip and other specified products for cash; after 1985, AMD would have open
access to Intel's product line if Intel accepted AMD products of

suffcient value. AMD

served as a second source to the successors to the 8086 chip: the 80186 and 80286.
35.

Beginnng in mid-1984, Intel, which was anious to be the sole source for
the contract

its upcoming 32-bit chip -the 80386 - decided to frstrate the operation of

by taking no more products from AM. Furthermore, Intel kept its decision secret from
AMD and the public. As internal Intel documents stated, Intel's objective was to
"(a)ssure AMD they are our primary source through regular management conduct and

formal meetings" in order to "(k)eep AM in the Intel camp." A 1986 Intel

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memorandum articulated its strategy: "Maintain a second-source, business as usual
postue in the marketplace. . . . Our strategy is to keep talking. . . . We do not want

(AM) to go on to Hitachi or NEC, and should not stimulate them to do so."
36.

Intel's plan succeeded: for about two years, AMD continued to believe,

incorrectly, that it would be permitted to second-source the 80386 microprocessor. As an
arbitrator later found, in a ruling that was confirmed by the California Supreme Cour,
"Intel to some extent lulled AM into some sense of

well-being about the continuation of

the relationship and to some extent contributed to AM's delay in reverse engineering
the 80386."

Development of AMD as a Threat to Intel's Monopoly
37.

Intel's conduct in the 1980s gave it a significant head start over AM in

the x86 Microprocessor Market. Not until June 1999 did AMD unveil its first x86 chip

without Intel pin-compatibilty, the AtWon microprocessor. Significantly, Athlon was the

first x86 microprocessor to ru at a speed of 1 GHz, and outperformed Intel's Pentium III
chip in benchmark tests.
38.

AMD's AtWon microprocessor consistently was recognized by the

industry as a superior product. In 2000, AtWon captued the "triple crown" of computing
accolades, winning the PC World Product of

the Year award, the PC Magazine Technical

Excellence prize for Best Component in Hardware Category, and the Maximum PC
magazine CPU of

the Year Award. By the end of2001, Athlon had received more than

80 awards worldwide.
39.

In April 2003, AM introduced the Opteron microprocessor, the world's

first 64-bit x86 microprocessor for severs. Several months later, AMD released the

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AtWon 64 microprocessor, its 64-bit x86 microprocessor for desktops and notebooks.

Importantly, and in contrast to Intel's Itanium microprocessor, AMD's new
microprocessors were backward-compatible, meaning that they could accommodate
32-bit softare as well as 64-bit programs.

40.

In November 2003, PC Magazine awarded the Athlon 64 and Opteron

microprocessors its Award for Techncal Excellence in the Components category. The
magazine wrote: "We tested the first 64-bit AMD Opteron processor in April 2003, and

were we impressed! It screamed on our server application performance tests. Six months
later, the Athlon 64 arrived, and again we were amazed by the processor's stellar

performance in off-the-shelf 32-bit gaming, content creation, and business applications."
By the end of 2004, the Athlon 64 and Opteron microprocessors had won over 60 awards
for innovation and performance.
41.

As Dell's CEO, Kevin Rollns, explained in February 2005, "(w)hen one

of our parners slips on the economics or they slip in terms ofthe technology, that causes

us great concern. For a while Intel admittedly slipped technologically and AM had
stepped forward, and we were seeing that in terms of customer response and requests."
42.

Notwithstanding AM's techncal achievements and generally lower
Intel's

prices, Intel continues to dominate the x86 Microprocessor Market. By means of

anticompetitive conduct, AMD's market share has been constrained unlawflly. Among
other things, this has prevented AMD from achieving minimum levels of efficient scale

necessary to compete with Intel as a predominant supplier to major customers. As a
result, consumers ofx86 microprocessors are forced to pay supra-competitive prices, are

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limited in their choice of products, and are denied the benefits of innovative
developments.
43.

Infoworld magazine analyzed the competitive landscape in its August 27,

2004 issue:

AMD has become known as the company that kept Intel honest, the LLnux ofthe semiconductor world. Competition from AM has reversed the trend of rising prices and stagnant innovation that characterize a controlled market. AM is responsible for $500 desktops, $1,200 rack servers, and multigigahertz mainstream microprocessors, them have Intel's logo on them. despite the fact that most of
Today, AM's pluck is paying off

bigger than ever before. After decades of aping Intel architectures, the AMD64 architectue, rooted in Opteron and AtWon 64 processors,
No con

has actually been imitated by Intel in the form of

a,

Intel's 64-bit version ofXeon. In a stuing reversal of
forte, Intel was forced to build that chip because Opteron

was invading a server market that the Intel Itanium was supposed to dominate.
Suddenly, Intel is feeling a breeze where its pants used to be. But with Intel mad as hell and hot on AM's heels, can AM grab enough sales traction to hold up to the punishing onslaught everyone knows is coming?
44.

Rather than engage AMD in lawfl competition, Intel has responded to

AM's threat to its monopoly position with a variety of anticompetitive practices
directed at OEMs, distributors, and retailers, and involving industry standard-setting and
other techncal abuses. These anticompetitive practices are discussed below.

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Intel's Anticompetitive Practices Directed at OEMs
45.
At least in the short term, most if not all of

the major OEMs must engage

significantly with Intel for several reasons. First, AM is too small to service all of an
OEM's needs while continuing to satisfy other customer demand. Second, to meet
customer expectations, OEMs must assure commercial computer buyers that
specifications, including the microprocessor, will remain unchanged during the product's

lifecycle. Third, Intel has encouraged end-users to specify that microprocessors be of the
same family among similar computers in one installation, as this is perceived to increase

reliabilty (although technically this is not the case). Intel has exploited OEMs' need to
engage signficantly with Intel by directing a series of anti

competitive practices at OEMs

designed to limit AM's growth.
46.

Through direct payments and other financial inducements, Intel has forced

OEMs into exclusive and near-exclusive deals, thereby limiting AMD's abilty to gain
incremental market share. In addition, Intel has bought limited exclusivity from OEMs in

order to exclude AM from the most profitable lines or from chanels of distribution
best tailored to take advantage of AM' s price/performance advantage over InteL. For
example, Intel has largely foreclosed AMD from the lucrative commercial desktop sector.
47.

An AprilS, 1999 aricle in PC Week described the coercive effect of one

such form of payment, the "Intel Inside" program: The wildly successful program, which began broadly in 1994 as a way to create brand equity for the Pentium processor, has evolved into Intel's premier marketing vehicle, managed by an army of attorneys, accountants and administrators. Intel has deftly used the program to keep competitors at bay in the most profitable segment of its

business: corporate PCs. That, in tu, has left computer
buyers with fewer options - and higher prices - when

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choosing business desktops, notebooks and PC servers. A look at the Intel Inside program requirements, which Intel keeps under tight wraps, shows how fully the chip maker controls the marketing purse strings of PC makers that sign
on. Interviews with numerous curent and former

whom declined to be identified, fearing reprisals from Intel - add fuel to the fire. These executives call the program addictive and claim their companes can't compete without
executives at Intel's largest OEM customers - all of it. . . .

The marketing dollars are enough of a carrot to make PC vendors sign off on Intel's restrictive program
requirements. Before PC makers are eligible for

reimbursement, they must sign an OEM Trademark License Agreement that regulates everyhing from logo size and color to branding. The eligible systems are added to a form called Attachment C, which Intel uses to keep track of qualifying Intel Inside products. OEMs must modify Attachment C every time they introduce a new Intel-based
system. Once a PC maker meets all Attachment C
guidelines, Intel reimburses 6 percent of

the total average

sellng price of each vendor's worldwide montWy

microprocessor shipments. But Intel doesn't give the cash back to the PC makers to use as they wish; instead, it deposits the money into an Intel-managed market development fud, or MDF, which the vendors must use to pay for print, Web, broadcast or radio advertising of their Intel-based systems. If they don't use the fuding within 12 months, they lose it. . . .
If a vendor strays from Intel's guidelines - even for an

infaction as minor as using the wrong size Intel logo on their packaging - Intel can freeze its eligible marketing
fuds. Since the fuds come from the PC companies' chip

payments, many customers believe Intel artificially inflates processor pricing to cover the costs. "They already have your extra money," said a veteran executive who retired last year from a top PC company. "They're charging you more money and then giving it back to you so you can advertise their products." . . .
In addition to its impact on pricing, the Intel Inside program also affects PC makers' product decisions. Although the guidelines don't prohibit use of non-Intel chips, they provide strong monetary disincentives to do so,

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several OEMs said. How strong? A licensee forfeits all it adds a non-Intel chip to the line. If it wishes to use another vendor's processor, it must establish an entirely new brand or sub-brand for that chip to retain fuding for the existing brand. "There is no doubt
MDF fuding for a brand if that it's one of

the major factors that infuence (product)

decisions," said a 20-year IBM PC executive who left the company in 1997. The source spoke from experience. In 1995, he said, IBM built several prototypes of low-cost
retail and small-office PCs based on Cyrix processors. But

executives scrapped the plans, in part because they couldn't leave what the source described as a "substantial" amount
of advertising money on the table. The branding

restrictions go a long way toward explaining why none of the top 10 PC makers uses non-Intel chips in its business
desktop lines.

48.

In addition, Intel has imposed on OEMs a system of first-dollar rebates

that have the practical and intended effect of creating exclusive or near-exclusive dealing

arangements and artificially foreclosing AM from competing for a meaningful share of
the market. In order to qualify for a rebate on any of its purchases, an OEM must first
achieve a target level of

purchases set by InteL. Only upon an OEM's reaching this target

wil Intel retroactively provide a rebate. Intel intentionally sets a rebate trigger at a level
of purchases it knows to constitute a dominant percentage of a customer's needs.
49.

Intel's rebate schemes are discriminatory and market-foreclosing. If a

customer chooses to purchase any significant quantity of microprocessors from an Intel

competitor such as AM, it wil not qualify for its rebate, and its price wil be higher on
all the Intel processors it buys across the board. By tailoring targets to each customer's
size and anticipated volume, Intel locks up significant percentages of the market much

more effectively and at a lesser cost to itself - but to a greater harm to AMD and
ultimately consumers - as compared to offering such rebates for comparable purchase
levels to all customers on a nondiscriminatory basis.

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50.

The use of retroactive rebates to limit AM to a small share of an OEM's

business heightens the obstacle to inducing the OEM to launch AMD-powered platforms. OEMs incur substantial expense in designing and engineering a new computer, and make

the investment only if they foresee a substantial chance of sellng a sufficient volume to

recoup it. Intel's rebate and other business strategies effectively cap the volumes of

AM-powered products that an OEM can sell. Hence, Intel's practices exacerbate
normal impediments to entry and expansion.
51.

Intel also uses product bundling in an exclusionary manner. For example,

in bidding for a new OEM platform, Intel bundles microprocessors with free or heavily

discounted chipsets or motherboards. Because AMD does not sell chipsets or
motherboards, this product bundling enables Intel to avoid competing with AMD directly on microprocessor price and quality by imposing disproportionate burdens on AMD that

are wholly unelated to AMD's product quality.
52.

The above anticompetitive practices are compounded by the potential for

retaliatory threats. Intel has a variety of

pressure points at its disposal: it can unilaterally

reduce or withdraw a discount, rebate, or subsidy; it can impose a discriminatory price increase on a disfavored customer, extend a price cut to that customer's competitor, or

force retailers into dropping the customer's computers and buying from its competitor

instead; or it can delay or dispute an allowance or rebate - all of which can tu a
profitable quarter for an OEM into an unprofitable one.
53.

Intel has the capability to use such threats not only to deter OEMs from

purchasing microprocessors from AM, but also to undermine AM product launches.
For example, the April

25, 2003 issue of The Inquirer, a computer industry joural,

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reported that Intel used implicit threats to keep vendors from attending AMD's launch of
its Opteron chip:

(The vendors) all told me that prior to the launch, they received a phone call from Intel. Intel asked if they were going to the launch. If they replied yes, the Intel rep asked them if it was 'important to them to go', or 'if they really
wanted to go' .

Pressing the vendors, I got the same response, 'Intel is too smart to threaten us directly, but it was quite clear from that phone call that we would be risking our various kickback money if we went'. If one vendor had said this to me, or even two, I would have put it down as little more than an
anoyed vendor, but they all told me this. When asked for

clarification, the stories sounded more and more alike, a pleasant sounding phone call from the Intel rep that made the hair on the back of their necks stand on end, and left no doubt in their minds as to what the 'request' actually was.
Obviously, no one wanted to have their names in print as
saying so, they were obviously scared to death. One vendor told me 'you need to sell Intel to surive you

know'. Others named a vendor who did not show because ofthe pressure, and two or three said 'why do you think there are no motherboards here'? Underneath the happiness of the occasion, there was an undercurent of uneasiness at best, and it was everywhere.
54.

In March 2005, the Japan Fair Trade Commission ("JFTC") found that

Intel's wholly-owned Japanese subsidiary, Intel Kabushiki Kaisha ("IJK"), had violated
Section 3 of Japan's Antimonopoly Act, explaining as follows:
IJK, since May 2002, has made the five major

Japanese OEMs refrain from adopting competitors' CPU s for all or most of the PCs manufactured and sold by them or all of the PCs that belong to
specific groups ofPCs referred to as 'series', by

making commitments to provide the five OEMs with rebates and/or certain fuds referred to as 'MDF' (Market Development Fund) in order to
maximize their MSS (the proportion of

Intel

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microprocessors incorporated into an OEM's computers), respectively, on condition that
(a) the Japanese OEMs make MSS

at 100% and refrain from adopting competitors' CPUs.
(b) the Japanese OEMs make MSS at

90%, and put the ratio of competitors' CPUs in the volume of CPUs to be incorporated
into the PCs manufactued and sold by them down to 10%; or
(c) the Japanese OEMs refrain from

adopting competitors' CPUs to be incorporated into PCs in more than one series with comparatively large amount of production volume to others.
55.
As a result, according to the JFTC, "the ratio of

the sales volume by AM

Japan and Transmeta USA among Total Domestic CPU Sales Volume decreased from
approximately 24% in 2002 to approximately 11 % in 2003. By means of such conducts,
IJKK has substantially restrained the competition in the market ofCPUs sold to the

Japanese OEMs, by acting to exclude its competitors' business activities related to the

sales ofCPUs to the five OEMs." Intel has accepted the JFTC's recommendations and
has chosen not to contest its conclusions.

Intel's Anticompetitive Practices Directed at Distributors
56.

Intel uses many of the same tactics it practices on OEMs to restrict

distributors from carring AMD processors or sellng AM products into markets it
deems strategic. For example, it entered into an exclusive deal with Synnex, which is one
of

the largest microprocessor distributors in the United States. Given Intel's greater than

80 percent market share, there is no pro-competitive justification for this arrangement.

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57.

As with OEMs, Intel offers discounts and rebates to distributors on the

condition that they not do business with AM, either worldwide or in strategic submarkets.
58.

Intel also offers a panoply of special programs for distributors who carr

Intel microprocessors exclusively: marketing bonuses, increased rebates, credit programs

for new customers (credits that can be used for all products from Intel and any other
suppliers), payment for normal freight charges, and special inventory assistance such as
credits to offset inventory costs.
59.

Intel also offers retroactive rebates triggered when a distributor reaches a

prescribed buying quota. Like the rebates offered to OEMs, the intent is to infict

economic punshment on those who do too much AM business. But, unlike OEMs,
distributors remain ignorant of the goals Intel has set for them or the precise

consequences of failng to meet them. Intel does not share this information with
distributors; they simply receive a check at the end of

the quarer. As a result, every

AMD chip that distributors purchase, they buy at their periL.

Intel's Anticompetitive Practices Directed at Retailers
60.

Approximately one-fifth of desktop and notebook computers are

purchased at retail stores. A handful of retailers dominate the United States PC market:
Best Buy and Circuit City are the largest, and other significant retailers are Wal-Mart,
Staples, Office Depot, and Office Max.
61.

Most of the PCs sold at retail are sold during four or five "buying seasons"

that correspond to events on the calendar, and retailers refresh their inventory for each.

A chipmaker faces a two-step process to get its platform on retail shelves: first, it must

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convince one or more OEMs to build machines using its microprocessor at a suggested

price (called "getting on the roadmap"); and second, it must convince the retailer to stock

and devote shelf space to these machines. In exchange for shelf space, the major retailers

demand market development fuds ("MDF"), which frequently entails a marketing-

related opportty that a chipmaker must buy for tens of thousands of dollars, such as
space in a Sunday circular, an in-store display, or an internet training opportity with the
chain's sales staff.
62.
using many of

Intel has historically enjoyed an advantage over AMD at retail because,
the strategies described above, it has had greater access to the OEMs'
OEMs' product plans.

"roadmaps" and the ability to exert pressure to keep AMD out of

Also, it has signficantly greater financial resources with which to buy retail shelf space.
To leverage those advantages, however, Intel also has made exclusive deals with many
key retailers around the world.
63.

According to AMD, it has generally outperformed Intel on a shelf-space to

sales basis. In the desktop segment during the fourth quarter of 2004, AMD-equipped

computers captued between a 33-38 percent share of Circuit City's sales, despite being
limited to 5 of

the 25 models (20 percent) on the Circuit City shelves. At Best Buy and
the shelf

CompUSA, with only approximately 15 percent of

space, AM computers

account for roughly 30 percent and 22 percent of

the stores' sales, respectively. These

numbers confrm that AMD's products perform well at retail, provided that space is
available.
64.

To fuher limit AM's abilty to compete, Intel instituted a rebate

program similar to what it foisted on OEMs, with similar exclusionar effect. Under this

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program, Intel provides full MDF payments to retailers only if

they agree to limit to

20 percent not just the shelf space devoted to AMD-based products, but also the share of

revenues they generate from sellng AM platforms. If AM's share exceeds
20 percent, the offending retailer's marketing support from Intel is cut by 33 percent
across all products.

Intel's Anticompetitive Practices Involvine Industrv Standard-Settine and Other Technical Abuses
65.

Companies within the computer industry often agree to design certain

aspects of their products in accordance with industry standards to ensure broad

compatibility. Indeed, standards are not only ubiquitous in the computer industry, they
are essentiaL. But when a company is unfairly excluded from the standards-setting

process or is denied timely access to the standard, competition can be restrained in a way

that reverberates throughout the entire market. Intel has employed, and continues to employ, a variety oftactics that have the purpose and effect of excluding and/or
hampering AMD's full and active participation in the development of

important industry

standards. It also has worked to deny AMD timely access to such standards. Its efforts

have hindered AM's ability to compete vigorously in the market.
66.

Although there exist industry organizations responsible for the standards

governng computer memory chips, such as the Joint Electron Device Engineering
Council ("JEDEC"), Intel has established secret committees, such as the Advanced

DRA Technology ("ADT") Consortium, in which it has disproportionate power, to
develop competing standards. Such arrangements allow Intel to tighten its control over

the industry by converting what component manufactuers intend as a public standard

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into a proprietary one, and to competitively disadvantage AMD by giving Intel a head
start in completing designs that are in accord with new industry standards.
67.

Even where it has been unable to exclude AMD from participating in the

development of industry standards, Intel has attempted to drive the adoption of standards

that have no substantial consumer benefit and the sole or dominant purose of which was

to competitively disadvantage AM based on its highly integrated microprocessor
architecture. For example, Intel proposed that JEDEC modify a proposed industry

standard for dual inline memory modules ("DIMMs") in a way that had no techncal

merit but that, if adopted, would delay AM's introduction of a technologically superior
part.
68.

Intel also has designed and marketed microprocessor-related products with

the goal of compromising performance for those who opt for AMD solutions, even if it

requires Intel to sacrifice its own product quality and integrity. For example, Intel has
designed its compiler, which translates softare programs into machine-readable

language, to degrade performance when a program is ru on an AM platform. When
softare programs created with Intel's compiler detect an AMD microprocessor

(i.e., when the "CPUID," which identifies the microprocessor, is "AuthenticAM"), they
execute a code path that degrades the program's performance or causes it to crash.
69.
A June 2004 discussion that occured in one of

Intel's online forus

ilustrates the issue. A user wrote in to the foru to complain that "code compiled with

the -xW flag now crashes on AM Athlon chips. Looking at the code, it appears that the
compiler now deliberately checks whether it's rung on an Intel processor and if

not

disables SSE support, despite the fact that AtWon MP and XP chips do SSE perfectly

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welL." An Intel employee, "tim18," responded that the problem was "not deliberate, it's
an oversight, due to AMD processors not being supported or tested with those options. . . . If it were deliberate, there would have been an explicit message displayed

indicating non-support for your processor, rather than a crash with an unandled CPUID
result." The user disagreed:

No, the problem is deliberate. The older versions of IFC

(version 7) produce code that works perfectly well on both

Intel and AM chips. The latest version does not. What is the difference? The new version, in the _intel-cpu_init internal fuction, checks the CPUID for the string
"Genuine

Intel". Ifthat string is not present, the

_intel_cpu_init fuction sets the CPU capability flags to zero, indicating that the processor doesn't support SSE2 or SSE or MM or.... Hence if you have compiled code with -xK (which requires SSE support), it wil crash on the Athlon XP chip: the code checks whether the CPU supports
SSE, incorrectly finds out that it doesn't, and dies. The

code wil work fine if compiled with -axK (ie check if SSE is supported, and ru generic i386 code if it isn't), but the SSE code wil_only - ru on Intel chips and not on any others, even if the other chips are perfectly capable of
handling SSE instructions. This isn't an Intel! AMD

compatibility issue. This is a deliberate attempt by the compiler engineers to hobble the performance ofIFCproduced code on non-Intel processors.
70.

The foru moderator subsequently wrote that, "(a)s Tim correctly

pointed out, this was a bug introduced into the vector math librar. It is fixed in the
curent 8.0 compilers. There are no plans to fix it for 7.1." In fact, while the 8.0 version

no longer has SSE ("Streaming SIMD Extensions") problems, it does stil check the
CPUID to determine whether the microprocessor is manufactued by Intel or AMD.
Thus, the potential for similar abuses continues to exist even with the newer version of
Intel's compiler.

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71.

Because Intel's compiler is superior to compilers offered by third parties

in terms of floating point or vectorized mathematical calculations, softare programmers

choose Intel's compiler for legitimate reasons. Unbeknownst to them, however,
performance of

their programs is degraded when ru on an AMD microprocessor - not

because of design deficiencies on the part of AMD, but rather due to Intel's
anti

competitive behavior.

ANTITRUST INJURY
72.
Intel's exclusionar and restrictive practices described herein have

suppressed competition in the relevant market and thereby have resulted in higher prices

for Intel x86 microprocessors, even after accounting for any discounts or rebates

attributable to microprocessor purchases. The overcharge imposed by Intel has been
passed on to plaintiff and other Class members in the form of higher prices for personal
computers, workstations and servers containing Intel x86 microprocessors.
73.

Intel's supra-competitive prices are not the result of superior products or

business acumen or competition on the merits. Instead, Intel has been able, at the

financial expense of Class members, to arificially infate prices for its products by
engaging in a series of exclusionary acts and restrictive practices with the purpose and

effect of restraining and preventing competition and unawflly acquiring and
maintaining its monopoly in the worldwide x86 Microprocessor Market.

COUNT I
Violation of State Antitrust Statutes

74.

Each of the above allegations is incorporated and repeated herein.

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75.

Plaintiff seeks damages for himself and the Class as permitted under the

following state antitrust laws for the following violations.
76. 77.
Intel has violated Arizona Revised Statutes § 44-1403.

Intel has violated California Business & Professions Code § 16700, et seq.
Intel has violated District of

78.
79.
80. 81.

Columbia Code § 28-4503.

Intel has violated Florida Statutes § 542.19.

Intel has violated Iowa Code § 553.5.
Intel has violated Kansas Statutes § 50-101, et seq.

82. 83.
84. 85. 86.

Intel has violated Maine Revised Statutes, Title 10, § 1102.

Intel has violated Michigan Compiled Laws § 445.773.
Intel has violated Minnesota Statutes § 325D.52.

Intel has violated Mississippi Code § 75-21-1, et seq.
Intel has violated Nevada Revised Statutes § 598A.060.
Intel has violated New Jersey Statutes § 56:9-4.

87.
88.

Intel has violated New Mexico Statutes § 57-1-2.

89. 90. 91. 92.

Intel has violated New York General Business Law § 340, et seq.

Intel has violated North Carolina General Statutes § 75-2.1
Intel has violated North Dakota Centu Code § 51-08.1-03.
Intel has violated South Dakota Codified Laws § 37-1-3.2.

93.
94. 95. 96.

Intel has violated Tennessee Code § 47-25-101, et seq.
Intel has violated Vermont Statutes, Title 9, § 2453.

Intel has violated West Virginia Code § 47-18-4.
Intel has violated Wisconsin Statutes § 133.03.

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COUNT II

Violation of State Consumer Protection Statutes
97.
Each of

the above allegations is incorporated and repeated herein.

98.

Plaintiff seeks damages for himself and the Class as permitted under the

following state consumer protection statutes for the following violations.
99.
100.

Intel has violated Alaska Statutes § 45.50.471, et seq.

Intel has violated Arkansas Code § 4-88-101, et seq.

101.
102. 103.

Intel has violated Californa Business & Professions Code § 17200, et seq.
Intel has violated District of

Columbia Code § 28-3901, et seq.

Intel has violated Florida Statutes § 501.201, et seq.

104.
105. 106. 107.

Intel has violated Idaho Code § 48-601, et seq.
Intel has violated Maine Revised Statutes, Title 5, § 207, et seq.

Intel has violated Montana Code § 30-14-101, et seq.
Intel has violated Nebraska Revised Statutes § 59-1601, et seq.
Intel has violated Nevada Revised Statutes § 598.0903, et seq.

108. 109.
110. 111.

Intel has violated New Hampshire Revised Statutes § 358-A:l, et seq.

Intel has violated New Mexico Statutes § 57-12-1, et seq.

Intel has violated North Carolina General Statutes § 75-1.1, et seq.
Intel has violated Utah Code § 13-11-1, et seq.

112.
113. 114.

Intel has violated Vermont Statutes, Title 9, § 2451, et seq.

Intel has violated West Virginia Code § 46A-6-101, et seq.

RELIEF REQUESTED
WHREFORE, Plaintiff

requests:

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A.

That this Cour declare, adjudge, and decree this action to be a proper

class action pursuant to Rule 23 of the Federal Rules of Civil Procedure on behalf of the
Class defined herein;
B.

That this Cour declare, adjudge, and decree that Intel has committed the

violations of state antitrust and consumer protection laws alleged herein;

c.

That Plaintiff and other Class members recover the maximum damages

permitted under the state antitrust and consumer protection laws determined to have been
violated by them;
D.

That Plaintiff and other Class members recover their reasonable attorneys'

fees and costs of suit;
E.

That Plaintiff and other Class members recover pre-judgment and

post-judgment interest on the above sums at the highest rate allowed by law; and
F.

That Plaintiff and other Class members be granted such other and fuher

relief as the Court may deem just and proper.

JURY DEMAND
Pursuant to Rule 38(b) of the Federal Rules of

Civil Procedure, Plaintiff demands

a trial by jury of all issues so triable in this case.

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PRICKETT, JONES LLIOTT, P.A.

By: ¿J:' JL~#6b3
J mes L. Holz n (DE Bar #663)

avid W. Gregory (DE Bar #4408) 1310 King Street P.O. Box 1328 Wilmington, DE 19899 (302) 888-6509 ilholzman~prickett.com dwgregory~prickett.com Attorneys for Plaintif Jerome Feitelberg

OF COUNSEL:

GOLD BENNETT CERA & SIDENER, LLP
Steven O. Sidener Joseph M. Baron 595 Market Street, Suite 2300
San Francisco, CA 94105 Telephone: (415) 777-2230 Facsimile: (415) 777-5189 Email: ssidener~gbcslaw.com Email: ibarton~gbcslaw.com

Dated: July 22, 2005

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