FTC sues Intel over anti-competitive tactics

 
Intel general counsel Doug Melamed said the case should have been settled, but settlement talks “stalled when the FTC insisted on unprecedented remedies … that would make it impossible for Intel to conduct business.”

The investigation was opened under the Bush administration, “which would suggest this is not about politics,” Feinstein said.

Still, the Obama administration has indicated it will go after anti-competitive behavior aggressively. Christine Varney, head of the Justice Department‘s Antitrust Division, has said in public speeches that there is less common ground between American and European antitrust regulators than she would like. In a September speech, she said “there is much room for further convergence between the U.S. and EC [European Commission].”

That has led observers to believe U.S. regulators could be adopting Europe’s skepticism when it comes to competition.
 
In May, the EC fined the company a record $1.45 billion — the largest-ever fine for breaking the competition law in the European Union (EU). The commission found Intel offered deals to computer makers, including Dell and HP, if they purchased most of their chips from Intel.
 
Intel appealed the decision, saying at the time the commission “initiated the investigation with a predisposed view” and ignored evidence that contradicted that view.

“Intel is convinced that a fair and complete evaluation of all the evidence invariably shows a pattern of vigorous competition…that benefited customers and consumers — exactly what sound global antitrust policy should encourage, not punish,” the company said.
 
Last month, New York Attorney General Andrew M. Cuomo filed a lawsuit against Intel for similar allegations, saying the company engaged in activities that would stop computer makers from using competitor Advanced Micro Devices’ (AMD) chips.
 
Also last month, Intel and AMD settled a five-year legal dispute over competition and patent licensing. Intel agreed to pay AMD $1.25 billion to drop multiple lawsuits.
 
Feinstein said the AMD settlement did not address all of the FTC’s concerns.
 
“Our complaint extends beyond the allegations made by AMD,” he said. “We’ve alleged a course of conduct that began 10 years ago and continues to the present.”
 
In addition to anti-competitive marketing practices, the FTC alleges that Intel secretly redesigned software to deliberately stunt the performance of competitors’ chips. The FTC complaint also charges that Intel has sought to cut out competition from graphic processing units, including graphic chips made by a company called Nvidia.
 
The complaint says Intel is in violation of Section 5 of the FTC Act, which is broader than antitrust laws and prohibits unfair methods of competition and monopolization.
 
David Balto, former policy director for the FTC, said it is a good sign that the agency “has retrieved Section 5, its key tool, out of the dust-bin of its enforcement tools.”
 
He said the FTC in the past has not used its teeth when going after Intel.
 
“This shows a much tougher FTC willing to grapple with the very difficult practices of competition,” he said. “Consumers have suffered a lot by having to buy more expensive products that are less innovative because Intel was able to dictate the rules of the road.”
 
But Jonathan Zuck, president of the Association for Competitive Technology (ACT), says it appears the FTC quickly piled on allegations that are “unsubstantiated and undocumented and weren’t even discussed before a few months ago.”
 
He disagrees that Intel has had the power to raise computer prices, arguing that they have been falling every year for the past decade. On Tuesday, ACT sent a letter to the FTC asking it to proceed with “extreme caution” and avoid action that could raise chip prices.
 
“I’m forced to ask, what’s the rush?” Zuck said, adding the agency is two commissioners short. The complaint “seems like a late homework assignment.”
 
Senators have expressed concern to the FTC about the EU’s handling of the Intel matter.
 
In October, Sen. Jim Webb (D-Va.) asked FTC Chairman Jon Leibowitz to “seek clearer ways to engage the European Commission … in order to ensure a free and fair trade environment for all international companies seeking to conduct business in Europe.”
 
In November, Sen. Mark Warner (D-Va.) said in a letter to Leibowitz that he hopes the commission examines the impact its investigations and decisions “may have on future technology competition, innovation and jobs.”
 
Sens. Orrin Hatch (R-Utah) and Chuck Grassley (R-Iowa) wrote in a letter last week that they are “growing concerned with the potential lack of transparency and due process utilized by foreign regulatory and enforcement entities and the effects their decisions can have on American business.”