Monday, June 09, 2008

FTC Opens Antitrust Investigation of Intel Pricing Practices: Report

This posting was written by John W. Arden.

In a reversal of its previous decision, the Federal Trade Commission has opened a formal investigation of Intel Corporation, according to a June 7 story in the New York Times.

The investigation was prompted by complaints by competitor Advanced Micro Devices (AMD) that Intel instituted pricing intended to maintain a near-monopoly in the microprocessor market, the story explained.

ADM alleges that Intel systematically offers computer manufacturers large discounts—sometimes below cost—in exchange for promises not to do business with competitors.

The complaining firm “has been scouring the world in search of regulators in Europe, Asia and the United States who would agree to prosecute Intent for what A.M.D. maintains are anticompetitive pricing practices,” said the article by Stephen Labaton. While meeting with “considerable success” in Europe, Japan, and Korea, the competitor was not able to gain support from federal and state antitrust enforcers.

However, William E. Kovacic, FTC Chair since March 31, authorized the investigation, with the support of the other Commissioners, the Times reported. Kovacic’s predecessor, Deborah Platt Majoras, had blocked a formal inquiry into the allegations for a number of months.

Intel has maintained that its prices were not below cost and that AMD was only attempting to make up for its failures in the marketplace.

Other Developments

Earlier this month, the South Korean Fair Trade Commission fined Intel the equivalent of $26 million for offering discounts to prevent Samsung Electronics Co. and Trigem Computer from buying products from AMD.

On January 10, 2008, the New York Attorney General announced an investigation into whether Intel violated state and federal antitrust laws by coercing customers to exclude AMD from the worldwide market for x86 computer processing units. (See the January 10, 2008 posting on Trade Regulation Talk.) Text of the announcement appears here.

In 2005, AMD made similar charges about Intel pricing policies in an antitrust suit filed in the federal district court in Wilmington, Delaware. The trial of that lawsuit was recently delayed to 2010.

AAI Reaction

The FTC’s opening of the investigation was hailed by the American Antitrust Institute (AAI).

“We congratulate the Commission on this decision to open an investigation, which finally brings the U.S. into this landmark monopolization case that is of such great interest all around the world,” said Albert Foer, President of AAI. The organization’s June 6 announcement appears here.

The non-profit education, research, and advocacy organization had been critical of the Commission’s failure to launch an investigation in the matter. On August 29, 2007, the AAI sent a letter to then-FTC Chairman Majoras, asking the U.S. government to review Intel’s strategic conduct against AMD, “which has gone so long unchecked.” (See the August 30, 2007 posting on Trade Regulation Talk.) Text of that letter appears here.

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