The United States Federal Trade Commission filed a lawsuit today against Intel Corporation, currently the world’s largest semiconductor company.
The United States Federal Trade Commission filed a lawsuit today against Intel Corporation, currently the world’s largest semiconductor company. The FTC is charging that Intel has illegally used its dominant market position for over a decade to stifle competition and strengthen its monopoly.
The FTC alleges that Intel has waged a systematic campaign to shut out competing microchips made by other companies (such as Advanced Micro Devices) by using threats and rewards aimed at the world’s largest computer manufacturers, namely Dell, Hewlett-Packard, and IBM.
Similar charges were filed by the European Commission resulting in a $1.45 billion USD fine. In order to head off similar fines from other jurisdictions, Intel settled all antitrust and intellectual property issues with AMD. Intel had threatened to shut down AMD's CPU production, a move that in hindsight seems to have backfired. The company paid AMD $1.25 billion for it to drop all of its complaints, with the hope that it would prevail in the appeals process and that the FTC would not pursue charges without its star witness. Those hopes now appear to be dashed.
Additionally, the FTC says that Intel secretly redesigned its software compiler in order to degrade the performance of non-Intel CPUs. Intel then told its customers and consumers that software performed better on Intel CPUs.The FTC is adamant that Intel deceived them by failing to disclose that these differences were due largely or entirely to Intel’s compiler design.
Intel also has the largest marketshare in graphics, thanks to its integrated chipsets. The FTC is concerned that the company may try to use the same tactics in the graphics market by "smothering potential competition from GPU chips such as those made by NVIDIA". Development on Intel chipsets by NVIDIA has already been halted due to licensing disputes.
The FTC also alleges that, "As part of this latest campaign [into the GPU market], Intel misled and deceived potential competitors in order to protect its monopoly". This could refer to Intel's Larrabee project, which was recently cancelled despite positive updates from Intel over the last year.
Intel has responded to the FTC lawsuit by issuing the following statement, “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's 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,” stated Melamed.
The case is tentatively scheduled to be heard before an Administrative Law Judge at 10:00 a.m. on September 15, 2010. A FTC decision will be issued within twenty months, substantially faster than usual in federal court antitrust litigation.