FTC Sues Intel for Alleged Anticompetitive Practices

What’s already been a very troubling year for Intel just got worse. The Federal Trade Commission is suing the world’s biggest computer chip maker, charging that the company has illegally used its dominant market position for a decade to stifle competition and strengthen its monopoly. They allege that Intel “has waged a systematic campaign to shut out rivals’ competing microchips by cutting off their access to the marketplace.”

“Intel has engaged in a deliberate campaign to hamstring competitive threats to its monopoly," said Richard A. Feinstein, Director of the FTC’s Bureau of Competition, 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."

In many respects the FTC’s charges mirror those of the European Commission which earlier this year ruled against Intel and levied a $1.5 billion fine. What appears to be new is the following allegation, outlined in the FTC document:

“Intel secretly redesigned key software, known as a compiler, in a way that deliberately stunted the performance of competitors’ CPU chips. Intel told its customers and the public that software performed better on Intel CPUs than on competitors’ CPUs, but the company deceived them by failing to disclose that these differences were due largely or entirely to Intel’s compiler design.”

Intel promptly issued a statement regarding the FTC suit, claiming it has "competed fairly and lawfully." It states that the FTC’s case is "misguided", based on claims added at the last minute and not investigated.

Intel 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."

Just a month ago it looked like things might cool off for Intel when it announced a comprehensive agreement to end all outstanding legal disputes with AMD, including antitrust litigation and patent cross license disputes. Under terms of the agreement, Intel and AMD agreed to give up any claims of breach from the previous license agreement, and Intel would pay AMD $1.25 billion.

Intel may be the latest casualty of the regulatory wars, which include the EU’s ongoing delays of Oracle’s acquisition of Sun Microsystems that have hurt both companies and their channels. Microsoft has had more than its share of legal hang-ups, though the EU officially closed up the notorious browser case against the software giant this week. Meanwhile, IBM, whose antitrust battles included a five-decade battle with the Department of Justice, is back in the legal news with two more actions against it. In October it was reported that the DOJ had launched a preliminary investigation into whether Big Blue has abused its mainframe monopoly. And on Tuesday, Neon Enterprise Software filed a lawsuit in connection with IBM’s efforts to prevent System z mainframe owners from using its zPrime software.

With multi-billion settlements at stake, it’s not just the lawyers who get rich out of this ongoing litigation, but at the end of the day, one can who really wins or loses? Nobody should be above the law, but isn’t it funny that three of the biggest ‘alleged’ abusers have been succeeding so long in an industry that has changed so much in the last 60 years?

Despite the epic battle from the 1950s to the 1990s, IBM’s still a dominant player in the IT industry, and its mainframe competitors are distant memories. Microsoft still sets the gold standard for software developers. And Intel continues to stand head and shoulders above its microprocessor competitors. These three companies are winners who make massive investments in R&D every year. It would appear that innovation and superior execution in an intensely competitive market might play a bigger role than the regulators.