- The Washington Times - Wednesday, December 16, 2009

UPDATED:

The Federal Trade Commission on Wednesday sued Intel Corp., charging the company has illegally used its dominant market position for a decade “to stifle competition and strengthen its monopoly.”

The agency said its complaint against Intel — the world’s leading computer-chip manufacturer — alleges the company has waged a systematic campaign to shut out rivals’ microchips by cutting off their access to the marketplace.

As a result, Intel has deprived consumers of choice and innovation in the microchips that comprise computers’ central processing unit, or CPU, the agency said.

The chips are critical components that often are referred to as the “brains” of a computer.

Intel responded to the announcement of the case by saying the company has competed “fairly and lawfully” and that its actions have benefited consumers.

“The highly competitive microprocessor industry, of which Intel is a key part, has kept innovation robust and prices declining at a faster rate than any other industry,” the company said in a press release. “The FTC’s case is misguided. It is based largely on claims that the FTC added at the last minute and has not investigated. In addition, it is explicitly not based on existing law but is instead intended to make new rules for regulating business conduct. These new rules would harm consumers by reducing innovation and raising prices.”

The case will appear before an FTC administrative law judge, not in federal court, said Richard A. Feinstein, director of the agency’s Bureau of Competition.

Mr. Feinstein said Intel will not have to pay a financial punishment if it loses the case and the findings cannot be used as a basis for civil litigation.

He said the agency chose an administrative judge so the case could be concluded swiftly. Mr. Feinstein said he expects the case to begin in September and be concluded by the end of 2010. The case also will go before the agency when the administrative judge concludes the case. The investigation started in May 2008.

Mr. Feinstein said the case extends beyond CPUs to include Intel’s exclusionary practices regarding graphics.

According to the FTC complaint, Intel’s anti-competitive tactics were designed to “put the brakes” on superior competitive products that threatened its monopoly in the CPU microchip market.

“Over the last decade, this strategy has succeeded in maintaining the Intel monopoly at the expense of consumers, who have been denied access to potentially superior, non-Intel CPU chips and lower prices,” the agency said.

Mr. Feinstein said: “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 the merits. The commissions action today seeks to remedy the damage that Intel has done to competition, innovation and, ultimately, the American consumer.”

Doug Melamed, Intel senior vice president and general counsel, said the case “could have and should have” been settled.

He also said settlement talks 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.

Mr. Melamed said such remedies would have made it “impossible for Intel to conduct business.”

“The FTC’s rush to file this case will cost taxpayers tens of millions of dollars to litigate issues that the FTC has not fully investigated,” he said. “It is the normal practice of antitrust enforcement agencies to investigate the facts before filing suit. The commission did not do that in this case.”

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