FTC Accuses Intel Of “Systematic Campaign” To Harm Rivals
Posted on December 16, 2009 |
The Federal Trade Commission has sued Intel, the world's largest manufacturer of computer chips, alleging that the company has "illegally used its dominant market position for a decade to stifle competition and strengthen its monopoly."
In its complaint, the FTC accuses Intel of waging what it calls a "systematic campaign to shut out rivals," in particular, Intel's main rival, Advanced Micro Devices, but also other smaller players in the market for PC chips, from access to the marketplace.
The FTC also accuses Intel of misdeeds against other rivals. As first reported by Bloomberg BusinessWeek, the commission is looking into the nature of Intel's relationship with Nvidia, a company that makes graphics chips or GPUs, which enhance the graphics and imagery in computer games. More recently, they've become increasingly useful in general purpose computing, making them a potential alternative to Intel chips.
"These products have lessened the need for CPUs, and therefore pose a threat to Intel's monopoly power," the FTC said.
The commission accuses Intel of "smothering potential competition" from GPU chips such as those made by Nvidia, saying in a statement that Intel "misled and deceived potential competitors in order to protect its monopoly.
As Bloomberg BusinessWeek reported on Dec. 3, the FTCs inquiry had homed in on a pair of dueling lawsuits between Intel and Nvidia concerning a patent and contract dispute. Having previously agreed to allow Nvidia to create graphics chips that are compatible with Intel's processors, Intel, the commission alleges, has sought to hold Nvidia back from becoming a competitive threat. "Intel’s apparent willingness to allow Nvidia to interoperate with Intel’s [chips] has dissolved as it has begun to perceive Nvidia as a threat to its monopoly position in the relevant markets," the complaint reads.
In an email statement, Nvidia applauded the decision: "We are particularly pleased to see scrutiny being placed on Intel’s behavior toward GPUs, which have become an increasingly important part of the PC industry."
AMD, in an emailed statement, called the FTC's action "good for consumers," calling it "yet another example of regulators around the globe acting to protect consumers by enforcing competition laws."
In a statement Intel called the FTC's suit "misguided," and said it has "competed fairly and lawfully," and that "its actions have benefited consumers." The FTC's case, Intel said "is based largely on claims that the FTC added at the last minute and has not investigated." Additionally, Intel said the complaint is not based "not on existing law but intended to make new rules for regulating business conduct," that it says would reduce innovation and result in higher prices.
Intel General Counsel Douglas Melamed said in a statement that the case "could have, and should have, been settled." Settlement talks had progressed, Intel said, but stalled when the FTC insisted on "unprecedented remedies -- including the restrictions of 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 said.
The case comes on the heels of a Nov. 12 settlement of a private lawsuit filed against Intel by AMD in 2005, the terms of which of hammered out in a two-day session with a mediator in Maui.
FTC officials emphasized that their mandate may go further than that of antitrust regulators. Intel engaged in behavior that violates a section of law that is "broader than the antitrust laws and prohibits unfair methods of competition, and deceptive acts and practices in commerce."
NY AG Cuomo Files Antitrust Lawsuit Against Intel
Posted on November 4, 2009 |
New York Attorney General Andrew Cuomo, has filed an antitrust lawsuit against the computer chip manufacturing giant Intel, accusing the company of engaging in a "systematic worldwide campaign of illegal, exclusionary conduct to maintain its monopoly power," in the market for computer chips starting in 2001.
The complaint alleges that Intel paid hundreds of millions and in some cases billions of dollars in rebates to PC manufacturers in an attempt to limit their use of chips from rival Advanced Micro Devices. When PC companies appeared to be getting too close to AMD, Intel would, the complaint says, threaten them with retribution by withholding payments they were receiving from Intel.
These payments, which Intel called "rebates," amounted to what Cuomo called "payoffs with no legitimate business purpose that Intel invented to disguise their anticompetitive nature."
"Rather than compete fairly, Intel used bribery and coercion to maintain a stranglehold on the market," Cuomo said in a statement. "Intel's actions not only unfairly restricted potential competitors, but also hurt average consumers who were robbed of better products and lower prices. These illegal tactics must stop and competition must be restored to this vital marketplace."
The complaint paints a picture of PC makers struggling to maintain their slim profit margins, fearing that Intel's payments might dry up if they used AMD chips in their computers. The complaint accuses Intel of threatening PC makers with retaliation if they did business with AMD. During the period from 2001 to 2006, the complaint alleges, Dell sold no computers with AMD chips in exchange for billions in payments from Intel.
In cases where PC makers did business with AMD against its wishes, the complaint says that Intel made efforts to limit how much business AMD could get. In 2002, the complaint says, Intel reached an agreement with Hewlett-Packard under which HP would cap the amount of AMD-based computers it would offer at 5%, effectively giving Intel a guaranteed 95% share of HP's computer business.
The complaint also covers the server business, a space where AMD made some serious competitive gains against Intel during 2005 through 2007. In instance, the complaint alleges that IBM agreed to cancel a server that was to use AMD chips after being offered a $130 million payment from Intel and various threats. Another server that used AMD chips was marketed only on an "unbranded" basis, the complaint says.
Intel didn't immediately return a call seeking comment, but I'll update this post as soon as I hear from someone there.
The entire 87-page complaint is embedded below. There's a lot more information after the jump.
