US FTC Files Formal Antitrust Complaint Against Intel

The U.S. Federal Trade Commission has filed an antitrust-related lawsuit against Intel, charging the world's largest computer chip maker with illegally using its dominant market position to stifle competition and strengthen its monopoly for a decade.

The FTC alleged that Intel has waged a "systematic campaign" to cut off rivals' access to the marketplace. Intel deprived consumers of choice and innovation in the microchip industry, the FTC alleged.

The FTC's decision to move forward with a case against Intel comes just a month after Intel settled antitrust and patent disputes with rival Advanced Micro Devices. Intel agreed to pay AMD US$1.25 billion in the settlement.

Intel's tactics were designed to "put the brakes" on superior products from competitors, the FTC said. Intel's efforts have denied microchip customers access to potentially superior products and lower prices, the FTC's complaint said.

"Intel has engaged in a deliberate campaign to hamstring competitive threats to its monopoly," Richard Feinstein, director of the FTC's Bureau of Competition, said in a statement. "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."

An Intel spokesman said the company was reviewing the FTC's complaint and will issue comments later Wednesday.

The complaint comes after "a multiyear investigation, extensive discussions within the commission and multiple meetings with Intel" and other interested parties, Commissioners Jon Leibowitz and J. Thomas Rosch said in a joint statement.

"Broadly speaking, the complaint alleges that Intel fell behind in the race for technological superiority in a number of markets and resorted to a wide range of anticompetitive conduct, including deception and coercion, to stall competitors until it could catch up," the joint statement said. "If the allegations in the complaint are true, Intel's actions over a period of years and continuing up until today have diminished competition and harmed consumers."

The FTC's complaint, tentatively scheduled to be heard by an FTC administrative judge on Sept. 8 next year, alleges that Intel used threats and rewards with the world's largest computer makers, including Dell, Hewlett-Packard and IBM, in an effort to "coerce" them not to buy rival CPU chips.

Intel used several tactics to keep computer makers from using rival CPUs, the FTC complaint said. The company threatened to increase prices, end technology collaborations, shut off supply and reduce marketing support to manufacturers that purchased too many products from Intel's competitors, the complaint said.

Manufacturers that purchased nearly all their CPUs from Intel received guarantees of supply during shortages, indemnification from intellectual property lawsuits and extra money to be used in bids against vendors offering non-Intel products, the complaint said.

Intel also offered volume discounts selectively to manufacturers, and it redesigned its compiler and library software in about 2003 to reduce the performance of computing CPUs, the FTC said.

Intel also paid or otherwise induced suppliers of complementary software and hardware products to eliminate or limit their support of non-Intel CPU products, and the company "misled " the public about the effects of its redesigned compiler on rival's CPUs and on industry benchmarks reflecting the performance of its CPUs compared to those of rivals, the FTC said.

Intel, now faced with falling behind the competition in the graphics processing unit, or GPU market, has recently tried to smother potential competition from GPU chips made by Nvidia, the FTC complaint said.

The FTC has charged Intel with violating Section 5 of the FTC Act, which is broader than the antitrust laws and prohibits unfair methods of competition, and deceptive acts and practices in commerce. The complaint also alleges that Intel engaged in illegal monopolization, attempted monopolization and monopoly maintenance, also in violation of Section 5 of the FTC Act.

The FTC is seeking an order that would prevent Intel from using threats, bundled prices, or other offers to encourage exclusive deals, hamper competition, or unfairly manipulate the prices of its CPU or GPU chips.

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