Intel Announces Unprecedented Growth in Antitrust Investigations

Published on June 6, 2008
by John Paczkowski

What a lousy week for Intel, yeah? First Korea’s Fair Trade Commission fines the company $25 million for abusing its dominant market position there and offering discounts to PC-makers in an effort to drive rival AMD out of the market. And now the U.S. Federal Trade Commission has opened a formal investigation into its pricing practices.

In recent days the commission has subpoenaed Intel, AMD and a number of their PC-maker customers as part of a probe into Intel’s pricing policies, which some claim are engineered to maintain a near-monopoly on the chip market. Intel, which has long claimed that its business practices are well within U.S. law, did so again today in a statement announcing its cooperation with the FTC investigation. “The evidence that this industry is fiercely competitive and working is compelling,” it said. “For example, prices for microprocessors declined by 42.4% from 2000 to the end of 2007. When competitors perform and execute, the market rewards them. When they falter and under-perform, the market responds accordingly.”

But what if a competitor, say AMD, falters and underperforms because a rival is threatening its customers? What if it falters because a rival is using illegal inducements to dissuade PC-makers from buying AMD processors and “knee-capping” those who do? Which is what AMD accused Intel of in its 2005 antitrust lawsuit. In 2000, for example, Michael Capellas, then chief executive of Compaq Computer, allegedly told AMD that Intel had withheld the delivery of some microprocessors he needed for servers because of Compaq’s relationship with AMD. He told AMD he would stop buying from it, saying he “had a gun to his head.” And in 2004, Gateway officials are alleged to have told AMD that Intel “beat them into guacamole” in retaliation for their limited dealings with its rival. And these are but two incidents in a list that includes similar alleged acts of coercion by Intel involving 38 other computer makers, distributors and retailers.

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