FTC sues Intel for anti-competitive practices

The US Federal Trade Commission has sued microprocessor-making giant Intel for illegally using its dominant industry position to shut out competitors and to strengthen its monopoly.

The FTC complaint alleges that Intel threw its weight around using a system of threats and rewards – called exclusive or restrictive dealing – aimed towards some of the biggest computer makers in the world, in order to force them not to buy computer chips from its rivals. Additionally, the commission also charged that Intel also secretly wrote software that stunted the performance of computer chips made by competitors, and that it is plotting to employ similar tactics as it eyes the smaller but growing competition in the adjacent market for computer graphics chips.

The commission is not suing for money, but for Intel to change the way it conducts business. It is seeking an order to prevent it from using threats, bundled prices, to encourage exclusive deals, hamper competition, or unfairly manipulate the prices of its microprocessors or graphics chips. It also wants Intel to submit some business decisions for approval by the commission before carrying them out, and to set up some type of monitoring of its practices.

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

Douglas Melamed, general counsel for Intel, told the New York Times that the FTC action was “misguided and unwarranted”, and amounted to “new rules for micromanaging business conduct.” He said the FTC’s recommendations would unfairly constrain the company’s pricing and marketing, hamper product design process and innovation, and force it to give away intellectual property.

According to the FTC, Intel’s actions violated section five of the FTC Act, which prohibits unfair methods of competition, and deceptive acts and practices in commerce.

This latest complaint comes just one month after Intel reached a US$1.25 billion settlement with rival AMD, over anti-trust and patent claims. In May, the European Commission fined Intel US$1.6 billion for abusing its dominant market position – a decision which the company is appealing. Intel was also found to be anti-competitive by South Korean regulators, who ordered the company to pay a fine of US$25.5 million, and by the Japan Fair Trade Commission, which ordered the company to eliminate discounts which were discriminatory to its competitors.

The case will go before an administrative law judge in September.