John Paczkowski

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FTC Sues Intel (Plus Full Text of Complaint)

ftcxmasIt’s going to be a long, cold winter for Intel legal.

The Federal Trade Commission filed suit against Intel (INTC) this morning, accusing the company of waging “a systematic campaign to shut out rivals’ competing microchips by cutting off their access to the marketplace.”

In its complaint (full text below), the FTC claims Intel used threats and bundled prices or other offers to encourage exclusive deals, hamper competition or unfairly manipulate the chip market.

The agency also alleges that Intel secretly redesigned certain compiler software in a way that deliberately stunted the performance of competitors’ chips. Intel then claimed the software performed better on its chips than on those of competitors, neglecting to disclose that performance differences were due largely to its compiler design.

“Intel has engaged in a deliberate campaign to hamstring competitive threats to its monopoly,” said Richard A. Feinstein, director of the FTC’s Bureau of Competition. “It’s been running roughshod over the principles of fair play and the laws protecting competition on the merits. The Commission’s action today seeks to remedy the damage that Intel has done to competition, innovation, and, ultimately, the American consumer.”

Significantly, the FTC complaint also takes issue with Intel’s behavior in graphics, accusing the chip maker of attempting to extend its monopoly to graphics processing units, which have become an increasingly important part of the PC industry.

“Having succeeded in slowing adoption of competing CPU chips over the past decade until it could catch up to competitors like Advanced Micro Devices, Intel allegedly once again finds itself falling behind the competition–this time in the critical market for graphics processing units, commonly known as GPUs, as well as some other related markets,” the FTC claims. “These products have lessened the need for CPUs, and therefore pose a threat to Intel’s monopoly power.”

The FTC charges that Intel has responded to this competitive challenge by embarking on a similar anticompetitive strategy, which aims to preserve its CPU monopoly by smothering potential competition from GPU chips such as those made by Nvidia. As part of this latest campaign, Intel misled and deceived potential competitors in order to protect its monopoly, the complaint alleges, adding that there is a dangerous probability that Intel’s unfair methods of competition could allow it to extend its monopoly into the GPU chip markets.

The FTC is seeking an order that would prevent Intel from using threats, bundled prices and similar tactics to encourage exclusive deals and hamper competition. The Commission’s action against Intel comes about a month after the chip maker settled its long-running antitrust dispute with rival AMD (AMD) for $1.25 billion.

Reached for comment, Intel called the suit “misguided” and “based largely on claims that the FTC added at the last minute and has not investigated.”

“This case could have, and should have, been settled,” said Intel general counsel Doug Melamed. “Settlement talks had progressed very far but stalled when the FTC insisted on unprecedented remedies–including the restrictions on lawful price competition and enforcement of intellectual property rights set forth in the complaint–that would make it impossible for Intel to conduct business.”

Melamed further asserts that “The FTC’s rush to file this case will cost taxpayers tens of millions of dollars to litigate issues that the FTC has not fully investigated. It is the normal practice of antitrust enforcement agencies to investigate the facts before filing suit. The Commission did not do that in this case.”

The company’s statement in full, below:

Intel Comments on FTC Suit

SANTA CLARA, Calif., December 16, 2009 – Intel Corporation issued the following statement regarding the suit filed by the U.S. Federal Trade Commission (FTC): “Intel has competed fairly and lawfully. Its actions have benefitted consumers. The highly competitive microprocessor industry, of which Intel is a key part, has kept innovation robust and prices declining at a faster rate than any other industry. The FTC’s case is misguided. It is based largely on claims that the FTC added at the last minute and has not investigated. In addition, it is explicitly not based on existing law but is instead intended to make new rules for regulating business conduct. These new rules would harm consumers by reducing innovation and raising prices.”

Intel senior vice president and general counsel Doug Melamed added, “This case could have, and should have, been settled. Settlement talks had progressed very far but stalled when the FTC insisted on unprecedented remedies–including the restrictions on lawful price competition and innovation set forth in the complaint–that would make it impossible for Intel to conduct business.”

“The FTC’s rush to file this case will cost taxpayers tens of millions of dollars to litigate issues that the FTC has not fully investigated. It is the normal practice of antitrust enforcement agencies to investigate the facts before filing suit. The Commission did not do that in this case,” said Melamed.

And the FTC’s complaint:


091216intelcmpt


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