Tuesday, January 15, 2008

New York State Attorney General Opens Investigation of Intel

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

Intel Corporation, the world's largest maker of computer microprocessors, is the subject of an antitrust investigation launched by New York State Attorney General Andrew M. Cuomo, according to a January 10 announcement.

The state is investigating whether Intel violated state and federal antitrust laws by coercing customers to exclude its main rival, Advanced Micro Devices (AMD), from the worldwide market for x86 computer processing units (CPU). Modern x86 CPUs are currently the industry-wide standard for a majority of desktops, laptops, notebooks, servers, and workstations.

Use of Monopoly Power to Exclude Competitor

"After careful preliminary review, we have determined that questions raised about Intel's potential anticompetitive conduct warrant a full and factual investigation," said Attorney General Cuomo. "Our investigation is focused on determining whether Intel has improperly used monopoly power to exclude competitors or stifle innovation," he added. "We will also look at whether Intel abused its power to remove competitive threats or harm competition in violation of New York and federal antitrust laws."

European, Asian Actions

Similar antitrust allegations have been examined by authorities in Europe and Asia and resulted in formal actions, including a cease and desist order, against Intel, according to the announcement. In July 2007, the European Commission and the Korean Fair Trade Commission separately reached preliminary conclusions that Intel violated competition law. In 2005, the Japanese Fair Trade Commission concluded that Intel violated its competition laws, and Intel agreed to cease and desist, it was noted.

Absence of Federal Action

New York’s action was hailed by the American Antitrust Institute (AAI), which had urged the Federal Trade Commission to undertake a similar investigation in an August 29, 2007 letter. To date, the FTC has not responded.

“This is an example of the wisdom of having state antitrust laws that replicate the federal law,” said Albert Foer, President of the AAI. “When there is a competitive problem that affects consumers, and the federal government is slow to act, the states have the ability—and responsibility to their citizens—to fill the vacuum.”

Although the allegations against Intel are unproven at this point, “the Intel case has become the landmark monopolization case of the Twenty-First Century,” Foer said. “It is significant because the market is global and there are only two competitors, with no anticipation of new entry.”

While applauding New York and any other states that might join the invstigation, Foer thought it strange “that the U.S. government has not taken a more active role.”

The New York Attorney General’s press release appears here on the attorney general’s web site. The AAI response to the action appears here on the Instutite’s site.

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