Intel Sued by FTC for Chip Monopoly

The Federal Trade Commission (FTC) announced today that they are suing the world's leading computer chip maker Intel Corporation, saying that the company "has illegally used its dominant market position for a decade to stifle competition and strengthen its monopoly."

In it's complaint, the FTC alleges that "Intel has waged a systematic campaign to shut out rivals’ competing microchips by cutting off their access to the marketplace. In the process, Intel deprived consumers of choice and innovation in the microchips that comprise the computers’ central processing unit, or CPU."

These microchips are critical components that are often referred to as the “brains” of a computer.

"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."

The FTC’s administrative complaint alleges that Intel carried out its anti-competitive campaign by using threats and rewards aimed at the world’s largest computer manufacturers, including Dell, Hewlett-Packard, and IBM, to coerce them not to buy rival computer CPU chips. Intel also used this practice, known as exclusive or restrictive dealing, to prevent computer makers from marketing any machines with non-Intel computer chips.

The FTC also accuses Intel of secretly redesigning key software, known as a compiler, in a way that intentionally hindered the performance of other manufacturers' CPU chips. Then Intel deceivingly told their customers and the public that software performed better with Intel CPUs than on competitors' CPUs without disclosing that the differences in performance were mainly due to the design of Intel's compiler.

The case is tentatively scheduled to be heard before an Administrative Law Judge on September 15, 2010, at 10:00 a.m.

Intel Corporation said in response to the FTC charges that they have "competed fairly and lawfully" and that consumers have benefited from the company's actions. Intel says that the federal government's suit is "misguided" and based on uninvestigated claims the FTC "added at the last minute."

The company said, "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 enforcement of intellectual property rights 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.

Intel announced earlier this year that the company is investing $7 billion in its U.S. manufacturing operations and employs more than 40,000 people domestically.



Sources:
Federal Trade Commission
Intel Corporation