Intel Settlement Is Administration’s Most Important Enforcement Victory: Antitrust Group

This posting was written by John W. Arden.

The Federal Trade Commission’s settlement of administrative charges of monopolization against Intel Corporation is “the most important antitrust enforcement victory achieved so far by the Obama Administration,” according to Bert Foer, president of the American Antitrust Institute (AAI).

A proposed consent order, announced yesterday by the FTC (see blog story below), would resolve the agency’s December 2009 complaint, alleging that Intel (1) 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 (2) sought to acquire a second monopoly in the relevant graphics markets.

The agency alleged that the conduct violated Section 5 of the FTC Act, which prohibits unfair methods of competition and unfair acts or practices.

The settlement will benefit competition and consumers worldwide, Foer said. “In light of the crucial importance of the $30-billion-plus chip market to the United States and the world economy, this action ranks high on the FTC’s all time list of accomplishments.”

The consent order would apply to markets for graphic chips and chipsets, in addition to CPUs, and would prevent Intel from leveraging its CPU monopoly into those other markets.

For the first time, the FTC clearly prohibited “market share discounts” and “first dollar discounts” by a dominant firm because of the anticompetitive effects, the AAI noted. The settlement also would prevent Intel from retaliating against original equipment manufacturers or retailers that use or carry chips made by Intel’s rivals. Furthermore, the settlement would prohibit Intel from selling its products below cost.

For a period of six years, the chipmaker would be required to allow graphic chips made by its rivals to seamlessly interface with their x86 chips. It would also be prohibited from engaging in predatory design-making changes that have the sole effect of harming rivals—with the burden on Intel to show a new design’s consumer benefits.

“The FTC’s settlement carefully preserves Intel’s incentive and ability to innovate, while adopting a burden that is less favorable to the manufacturer than most case law provides,” said Foer.

The American Antitrust Institute is an independent, non-profit education, research, and advocacy organization based in Washington, D.C. Its stated mission is to “increase the role of competition, assure that competition works in the interests of consumers, and challenge abuses of concentrated economic power in the American and world economy.”

Text of AAI’s statement on the settlement appears here on the group’s website.