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FTC files suit against Intel

Agency alleges that computer chip giant launched campaign to shut out rivals

WASHINGTON – The Federal Trade Commission on Wednesday sued Intel Corp., accusing the computer chip giant of abusing its market dominance for a decade to stifle competition.

The FTC alleged that Intel has waged a systematic and illegal campaign to shut out rival makers of central-processing-unit chips, the main brains of a computer, by cutting off their access to the marketplace. In doing so, the agency contended, the world’s largest chip-maker has deprived consumers of choice by denying them access to potentially superior competing chips and lower prices.

“Intel has engaged in a deliberate campaign to hamstring competitive threats to its monopoly,” said Richard Feinstein, director of the FTC’s competition bureau. “It’s been running roughshod over the principles of fair play and the laws protecting competition on the merits.”

Intel insisted it had done nothing wrong.

The suit is the latest antitrust challenge to Intel, which has been targeted by regulators in Europe and Asia. The European Union levied a $1.45 billion fine against Intel earlier this year, alleging it had forced computer manufacturers to use its chips instead of those of its main rival, Advanced Micro Devices Inc.

New York Attorney General Andrew Cuomo recently filed antitrust charges against Intel. And last month, the company agreed to pay $1.25 billion to AMD to settle a long-running lawsuit that echoed many of the antitrust allegations.

The FTC’s administrative complaint alleged that Intel used threats and rewards aimed at the world’s largest computer-makers, including Dell Inc., Hewlett-Packard Co. and IBM Corp., to coerce them not to buy rival chips. In addition, the agency accused Intel of secretly redesigning key software, known as a compiler, in a way that stunted the performance of competitors’ products.

The FTC filed the case under a statute that does not allow any fines. Instead, the FTC is seeking to force Intel to change its business practices, including limiting the way it uses discounts and bundling to sell its products.

Intel called the case “misguided.” Intel general counsel Doug Melamed said the company unsuccessfully tried to settle the case and believed the FTC unfairly lumped in recent allegations regarding new graphic chips that it hadn’t properly investigated.

He said the proposed remedies would prevent Intel from competing in the fast-changing computer market and that, if the FTC won the case, it would lead to new government rules “to regulate and micromanage business.”

“What’s at stake is the ability of this great American manufacturing company and innovation engine to continue benefiting consumers the way it has in the past,” Melamed said.

The case will go before an administrative judge in September. If the FTC is successful, its commissioners would decide on final actions, Feinstein said. The entire process is expected to take 18 to 24 months.

Feinstein said the case did not reflect a more aggressive antitrust focus of the Obama administration. He noted that the formal investigation began in May 2008 under the Bush administration and that the FTC voted 3-0 to file the suit, with one Republican joining two Democrats. Another Republican commissioner, William Kovacic, recused himself. A fifth commission seat is vacant.

“This is more of a reminder to the business community,” Feinstein said, “that when we perceive monopolies … engaging in exclusionary conduct to the detriment of consumers, we are prepared to act.”


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