December 17, 2009
By

D.H. Kass

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The Federal Trade Commission is suing Intel Corp., charging that the chip-maker “illegally used its dominant market position for a decade to stifle competition and strengthen its monopoly.”

The FTC alleges that Intel systematically boxed out competing micro chips, specifically for graphics processing chips, by barring access to the market, depriving consumers of choice and innovation that might otherwise have occurred.

The suit comes a month after Intel agreed to pay rival Advanced Micro Devices $1.25 billion to resolve one of the computer industry’s most acrimonious disputes. AMD accused Intel of impeding competition for computer chips by using its monopoly power to hamper sales of AMD’s chipsets, charging that it intimidated system makers by threatening to withdraw rebates and shrink marketing support.

The FTC charged that Intel’s tactics were “designed to put the brakes on superior competitive products that threatened its monopoly” at the expense of consumers.

The complaint is an administrative action, which can be heard in front of an FTC administrative law judge, with a trial set for September 2010.

“Intel has engaged in a deliberate campaign to hamstring competitive threats to its monopoly,” said Richard A. Feinstein, director of the FTC’s Bureau of Competition.

“It’s been running roughshod over the principles of fair play and the laws protection competition on the merits. The Commission’s action today seeks to remedy the damage that Intel has done to competition, innovation, and, ultimately, the American consumer.”

The nature of the complaint is more far reaching than charges of antitrust activities. The FTC alleges in the suit that Intel misled and deceived competitors in order to protect its monopoly.

According to the FTC’s complaint, Intel’s anticompetitive tactics violate Section 5 of the FTC Act, which is broader than the antitrust laws and prohibits unfair methods of competition and deceptive acts and practices in commerce.

Intel issues fast response

Intel swiftly responded to the FTC’s charges, issuing a statement and holding an online briefing.

“The lawsuit filed by the FTC this morning is misguided and unwarranted, said Doug Melamed, Intel senior vice president and general counsel. “Put simply, Intel has not violated the law.”

Melamed accused the FTC of erroneously applying the precepts of competition law.

“The commission is quite explicit that this lawsuit is not based on claims that Intel violated the existing anti-trust laws,” he said. “The commission is, in effect, disregarding decades of guidance from the Supreme Court and lower courts about the meaning of sound competition law,” he said.

“Instead, the FTC is advocating new rules for regulating and micro-managing business content. Those rules will harm not help competition and reduce incentives for companies to invest in research and development and other pro-competitive activities.”

Melamed suggested that Intel was surprised by the FTC’s actions and that the issues “could have and should have been resolved by a voluntary settlement between Intel and the FTC.”

“Over the past weeks we have been progressing toward a settlement of all outstanding issues with the FTC,” he said.

“What brought us to litigation is the addition of new issues over graphics and benchmarks, some of which were first mentioned to Intel as recently as December 8 and none of which was fully investigated by the FTC,” he said.

“It is obvious from the complaint that the FTC does not understand important aspects of the computer industry.”

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