Intel Agrees to Settle New York Attorney General’s Antitrust Action

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

Intel Corporation announced yesterday that it had reached an agreement with the New York State Attorney General to terminate an antitrust lawsuit filed by the state in November 2009. Intel has agreed to pay $6.5 million to cover some of the costs incurred by the New York Attorney General in the litigation. The computer chip maker did not admit to any wrongdoing.

Recent Decisions

The agreement to end the litigation comes after three recent decisions of the federal district court in Wilmington, Delaware, scaling back the suit. In December 2011, the court dismissed the state’s Donnelly Act treble damages claims on behalf of New York consumers and non-state public entities; dismissed its Donnelly Act claims on behalf of non-state public entities, such as political subdivisions, local entities, and public authorities; and granted Intel’s motion for partial summary judgment on statute of limitations grounds (2011-2 Trade Cases ¶77,711, 2011-2 Trade Cases ¶77,712, 2011-2 Trade Cases ¶77,713).

The settlement agreement states that the decisions in favor of Intel “effectively eviscerated the State’s damages claims.” The settlement “releases Intel from all claims, known or unknown, including claims assigned to the State, up through the date of execution of the Settlement Agreement, that were or could have been asserted in the Action . . . .” Pursuant to the settlement, the New York Attorney General will terminate its investigation into Intel.

Exclusionary Conduct

The state filed the action in November 2009, alleging that Intel engaged in a systematic worldwide campaign of illegal, exclusionary conduct to maintain its monopoly power and prices in the market for x86 microprocessors, the “brains” of personal computers (PCs).

The state alleged violations of the Sherman Act and New York’s Donnelly Act and Executive Law. It sought monetary relief on behalf of the state as a purchaser of computers containing x86 microprocessors, as well as New York consumers and non-state public entities who purchased such computers. In addition, the state sought injunctive and other equitable relief.

“Following recent court rulings in Intel’s favor that significantly and appropriately narrowed the scope of this case, we were able to reach an agreement with New York to bring to an end what remained of the case,” said Doug Melamed, senior vice president and general counsel at Intel, in a February 9 news release.

“We have always said that Intel’s business practices are lawful, pro-competitive and beneficial to consumers, and we are pleased this matter has been resolved,” Melamed stated.

The case is State of New York v. Intel Corp., U.S. District Court, D. Delaware. No. 09-827-LPS. A copy of the settlement agreement appears here.

Publisher Could Have Monopolized Market for Bank Rate Websites

This posting was written by Darius Sturmer, Editor of CCH Trade Regulation Reporter.

A company in the business of aggregating and publishing bank rate tables listing interest rates from financial institutions could have unlawfully monopolized or attempted to monopolize the market for bank rate websites, but had not engaged in a predatory price fixing conspiracy, the federal district court in Newark, New Jersey, has ruled.

A complaining competitor adequately alleged that the company violated federal and New Jersey antitrust law by entering into exclusive dealing arrangements with online media outlets that allegedly prevented competitors from gaining necessary distribution outlets for their data, the court found.

The competitor, however, failed to offer factual allegations that the defending company acted in concert with any other entity to price below some measure of cost. Therefore, a motion to dismiss was granted as to the price fixing claim, but denied as to the other claims.

Monopoly Power

The complaining competitor sufficiently alleged that the defendant possessed monopoly power by claiming: that the defendant had reached a relevant market share of over 95%, that it had entered into agreements with more than 300 partner sites, that the prices it charged to customers had become inelastic, and that independent competitors had been pushed out or acquired as a result of the defendant's scheme.

Predatory Pricing

The allegations of anticompetitive conduct was bolstered by claims that the defendant purposefully predatorily priced its rate listings below cost, and sometimes for free, in order to acquire customers from its rivals and to drive those rivals out of the market, the court noted.
The court rejected arguments that there was no market foreclosure and that a one-year contract with partner websites was not restrictive to the extent condemned by the antitrust laws.

The complaint alleged conduct—such as an agreement with a financial media website allowing the defendant to set rates in exchange for waiving annual license fees—that would impair the opportunities of rivals for whom waiving license fees was not feasible and who were, as a consequence, excluded from doing business with those website partners, in the court’s view.

The decision is BanxCorp. v. Bankrate Inc., 2011-2 Trade Cases ¶77,750.

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.

FTC, Minnesota Can Proceed with Claims Against Drug Company’s Acquisition

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

The federal district court in Minneapolis will allow the Federal Trade Commission and the State of Minnesota to proceed to trial with their claims against Lundbeck, Inc., in connection with the drug company’s 2006 acquisition of a drug—NeoProfen—used to treat a potentially-deadly congenital heart defect in premature babies.

The court denied Lundbeck’s motion for summary judgment and set a set a trial date of December 7, 2009.

When it acquired NeoProfen, Lundbeck—formerly Ovation Pharmaceuticals, Inc.—had already held the rights to Indocin (injectable indomethacin)—the only drug available to treat patent ductus arteriosus (PDA) in the United States. NeoProfen (injectable ibuprofen) had not been approved by the Food and Drug Administration to treat PDA but was used in Europe to treat the disease.

Government Allegations

The FTC alleged that—by acquiring the rights to NeoProfen—Lundbeck violated Sec. 7 of the Clayton Act and Sec. 5 of the FTC Act.

Similarly, the State of Minnesota argued that Lundbeck violated Sec. 7 of the Clayton Act by acquiring the rights to NeoProfen and violated Sec. 2 of the Sherman Act by willfully maintaining its monopoly power in the market for the sale of drugs for the treatment of PDA.

Same Market?

On its motion for summary judgment, Lundbeck contended that Indocin and NeoProfen were not in the same market. It maintained that doctors distinguish Indocin from NeoProfen based on clinical and safety attributes and that doctors do not switch between the drugs based on price. The court rejected the contention.

The FTC and Minnesota responded that Indocin and NeoProfen treated the same medical condition in the same patient population. In addition, a significant number
of hospitals stocked either Indocin or NeoProfen but not both, and hospitals considered price when purchasing drugs.

Market Power

The court also rejected Lundbeck’s argument that it lacked market power because the entry of a generic manufacturer of indomethacin was imminent. The FTC and the State of Minnesota pointed to manufacturing difficulties, and there was no agreement that generic indomethacin would be in the market within the calendar year, the court explained.

The July 21 decision in FTC v. Lundbeck, Inc., appears at 2009-2 CCH Trade Cases ¶ 76,682.