FTC accuses Intel of stifling competition in CPU market

The Federal Trade Commission alleges in an administrative action filed today that Intel Corp. has engaged in decade-long pattern of anticompetitive behavior, and seeks non-monetary remedies against the computer chip giant.

The Federal Trade Commission (FTC) has become the latest in a growing list of organizations accusing computer chip maker Intel Corp. of unfair competition. The FTC alleges in am administrative complaint filed today that the company has used its dominant market position for a decade to stifle competition and create a monopoly.

The complaint accuses Intel of using a combination of threats and rewards to coerce large computer manufacturers into buying Intel’s central processing units and to prevent manufacturers from marketing computers with non-Intel chips. It also alleges that Intel secretly redesigned compiler software to inhibit its performance on other makers’ chips, telling customers that the difference was the result of Intel’s chip performance.

The FTC added that the pattern of anticompetitive behavior established in the CPU market now is being repeated in the emerging graphics processing unit market.

“The story is that over a period going back to 1999, at every stage at which Intel’s domination in various chip markets has been threatened, rather than competing aggressively in the marketplace, they responded with a course of conduct that has been exclusionary and detrimental to competition and to customers,” said Richard Feinstein, director of FTC's Bureau of Competition.

Intel responded to the FTC charges with a statement calling the enforcement action misguided and based on claims that have not been fully investigated.

“It is the normal practice of antitrust enforcement agencies to investigate the facts before filing suit,” said Intel senior vice president and general counsel Doug Melamed. “The commission did not do that in this case.”

Feinstein countered that the case had been fully investigated and that the investigation began in May 2008.

Although the complaint alleges violations of the Sherman Antitrust Act, it is filed under Section 5 of the FTC Act, which is broader than the antitrust laws and allows a trial before an FTC administrative law judge.

“It’s going to proceed rapidly,” Feinstein said. The trial is scheduled to start in September next year, and should proceed faster than if the action were taken in federal court. “I would confidently predict that it would be completed by this time next year.”

Feinstein said that the FTC will be seeking conduct relief rather than financial penalties.

“The remedy that FTC is seeking does not include a monetary penalty,” he said. “There is no goal of breaking up Intel. We are not seeking divestiture.”

Feinstein said the possible remedies being sought include modifications in pricing practices, limiting the company’s ability to bundle products, prohibitions against deceptive conduct and possibly requiring greater interoperability in the products and the sharing of intellectual property to restore competition.

Intel’s Melamed called the requested remedies unprecedented and overly restrictive.

“This case could have, and should have, been settled,” he said. “Settlement talks had progressed very far, but stalled when the FTC insisted on unprecedented remedies, including the restrictions on lawful price competition and enforcement of intellectual property rights set for in the complaint, that would make it impossible for Intel to conduct business.”

Feinstein responded that the remedies are not unprecedented. “The possibility of a settlement was discussed,” he said. “The parties were not able to come to terms.”

Intel recently settled a lawsuit brought by competitor Advanced Micro Devices, and faces addidtional actions brought by the European Community and the state of New York.

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