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FTC Accuses Intel Of "Systematic Campaign" To Harm Rivals

Posted by: Arik Hesseldahl on December 16, 2009

The Federal Trade Commission has sued Intel, the world’s largest manufacturer of computer chips, alleging that the company has “illegally used its dominant market position for a decade to stifle competition and strengthen its monopoly.”

In its complaint, the FTC accuses Intel of waging what it calls a “systematic campaign to shut out rivals,” in particular, Intel’s main rival, Advanced Micro Devices, but also other smaller players in the market for PC chips, from access to the marketplace.

The FTC also accuses Intel of misdeeds against other rivals. As first reported by Bloomberg BusinessWeek, the commission is looking into the nature of Intel’s relationship with Nvidia, a company that makes graphics chips or GPUs, which enhance the graphics and imagery in computer games. More recently, they’ve become increasingly useful in general purpose computing, making them a potential alternative to Intel chips.

“These products have lessened the need for CPUs, and therefore pose a threat to Intel’s monopoly power,” the FTC said.

The commission accuses Intel of “smothering potential competition” from GPU chips such as those made by Nvidia, saying in a statement that Intel “misled and deceived potential competitors in order to protect its monopoly.

As Bloomberg BusinessWeek reported on Dec. 3, the FTCs inquiry had homed in on a pair of dueling lawsuits between Intel and Nvidia concerning a patent and contract dispute. Having previously agreed to allow Nvidia to create graphics chips that are compatible with Intel’s processors, Intel, the commission alleges, has sought to hold Nvidia back from becoming a competitive threat. “Intel’s apparent willingness to allow Nvidia to interoperate with Intel’s [chips] has dissolved as it has begun to perceive Nvidia as a threat to its monopoly position in the relevant markets,” the complaint reads.

In an email statement, Nvidia applauded the decision: “We are particularly pleased to see scrutiny being placed on Intel’s behavior toward GPUs, which have become an increasingly important part of the PC industry.”

AMD, in an emailed statement, called the FTC’s action “good for consumers,” calling it “yet another example of regulators around the globe acting to protect consumers by enforcing competition laws.”

In a statement Intel called the FTC’s suit “misguided,” and said it has “competed fairly and lawfully,” and that “its actions have benefited consumers.” The FTC’s case, Intel said “is based largely on claims that the FTC added at the last minute and has not investigated.” Additionally, Intel said the complaint is not based “not on existing law but intended to make new rules for regulating business conduct,” that it says would reduce innovation and result in higher prices.

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

The case comes on the heels of a Nov. 12 settlement of a private lawsuit filed against Intel by AMD in 2005, the terms of which of hammered out in a two-day session with a mediator in Maui.

FTC officials emphasized that their mandate may go further than that of antitrust regulators. Intel engaged in behavior that violates a section of law that is “broader than the antitrust laws and prohibits unfair methods of competition, and deceptive acts and practices in commerce.”

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Reader Comments

Brent Fermin

December 16, 2009 11:26 AM

Intel should never be allowed to dominate other chip manufacturers unless its in the areas of innovation and production. Marketing and financial deals must be regulated to prevent anti-competitive behavior.


December 16, 2009 12:51 PM

Intel says, "If you change our rules, we'll raise prices."

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BusinessWeek writers Peter Burrows, Cliff Edwards, Olga Kharif, Aaron Ricadela, Douglas MacMillan, and Spencer Ante dig behind the headlines to analyze what’s really happening throughout the world of technology. One of the first mainstream media tech blogs, Tech Beat covers everything from tech bellwethers like Apple, Google, and Intel and emerging new leaders such as Facebook to new technologies, trends, and controversies.



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