Wednesday, August 04, 2010

Intel Agrees to Settle FTC Allegations of Anticompetitive Conduct

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

FTC Chairman Jon Leibowitz, joined by Commissioner Julie Brill and Bureau of Competition Director Richard Feinstein, announced today a proposed consent order to resolve the agency’s action against Intel Corporation for allegedly stifling competition in the markets for computer chips.

The agency’s December 2009 complaint (CCH Trade Regulation Reporter ¶16,398) alleged that Intel unlawfully maintained its monopoly in the markets for x86 Central Processing Units (CPUs) for desktops, notebooks, and servers, as well as smaller relevant markets, and sought to acquire a second monopoly in the relevant graphics markets. The conduct allegedly violated Sec. 5 of the FTC Act, which prohibits unfair methods of competition and unfair acts or practices.

Chairman Leibowitz said that the relief obtained from Intel in this “exceptionally important case” goes well beyond relief achieved elsewhere, including a private settlement with AMD Corp.-- Intel’s only significant competitor in the relevant x86 CPU markets--and international enforcement actions. Intel has been fined by the European Commission and Korea Fair Trade Commission for anticompetitive practices.

The FTC settlement applies, not only to CPUs, but also to graphics processing units (GPUs), and chipsets. It prohibits Intel from using threats, bundled prices, or other offers to exclude or hamper competition or otherwise unreasonably inhibit the sale of competitive CPUs or GPUs, according to the agency.

The FTC settlement order is intended to protect competition and not any single competitor. Chairman Leibowitz noted that the conduct restrictions would provide a level playing field for AMD and smaller rival VIA Technologies. Both the international settlements and the settlement between Intel and AMD focused primarily, if not exclusively, on AMD’s ability to compete in CPU market.

The settlement also prohibits Intel from deceiving computer manufacturers about the performance of non-Intel CPUs or GPUs. Intel allegedly redesigned its compiler and library software to reduce the performance of competing CPUs and failed to disclose the effects of its redesigned compiler on the performance of non-Intel CPUs.

Under the proposed consent order, Intel would be required to take steps to prevent future misrepresentations related to its compilers and libraries used by software developers to write software and make it work efficiently. In addition, Intel would be required to implement a $10 million fund to reimburse customers who relied on Intel’s statements regarding its compilers or libraries for the costs associated with recompiling their software using non-Intel compilers or library products.

Commissioner Brill said that the case reflected the FTC's efforts to maintain competition in high tech markets--a top priority at the Commission. She said that the Commission would not hesitate to challenge conduct involving complex, high tech products in innovative markets in the future.

Intel Response

“This agreement provides a framework that will allow us to continue to compete and to provide our customers the best possible products at the best prices,” said Doug Melamed, Intel senior vice president and general counsel. “The settlement enables us to put an end to the expense and distraction of the FTC litigation,” he added.

Intel admitted no wrongdoing. In response to the agency’s complaint, Intel had argued that microprocessor prices had fallen and that innovation had dramatically increased during the relevant period. Intel also challenged the FTC’s “unbounded application” of Section 5 of the FTC Act.

At the time the FTC issued its complaint, Melamed took issue with the “unprecedented remedies” sought by the agency. According to the FTC officials, however, the parties agreed on terms that included most of the relief outlined by the agency in the complaint’s Notice of Contemplated Relief.

The proposed consent order, In the Matter of Intel Corporation, FTC Dkt. No. 9341, will appear at Trade Regulation Reporter ¶16,483.

A story on the issuance of the administrative complaint ("FTC Sues Intel for Monopolization") was posted December 16, 2009 on Trade Regulation Talk.

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