- The Washington Times - Thursday, December 17, 2009

The Federal Trade Commission sued Intel Corp. on Wednesday, accusing the world’s biggest computer chip maker of using its market dominance for decades to intimidate customers and squash competition.

The agency claims Intel “waged a systematic campaign” to stifle rivals by denying them access to the marketplace.

“At every attempt to challenge its dominance, Intel responded with conduct that was exclusionary and detrimental to competition and consumers,” Richard A. Feinstein, director of the FTC’s Bureau of Competition, told reporters at the agency’s Washington headquarters.

Unlike previous antitrust cases that involved Intel’s central processing units, or CPUs, the FTC’s latest case deals with Intel’s attempt to extend its dominance in graphics processing units, or GPUs, which handle video and other images.

The agency’s complaint also said Intel secretly reworked key computer software, known as a compiler, so that it “deliberately stunted the performance of competitors’ CPU chips.”

The FTC wants the company to give customers free replacement software.

The new charges were lodged against Intel as another frequent antitrust target, Microsoft Corp., resolved a major issue of its own in Europe. Microsoft agreed Wednesday to offer users of its Windows operating system a choice of Web browsers from other companies. In exchange, the European Commission would drop charges against Microsoft over its practice of bundling Windows with its Internet Explorer browser.

The FTC complaint against Intel accuses the company of using threats and rewards to keep major computer makers such as Dell Inc. and IBM Corp. from buying rival chips or marketing computers that used them.

Intel responded by saying that the company has competed “fairly and lawfully” and that the FTC’s case is “misguided and unwarranted.”

“Put simply, Intel has not violated the law,” Douglas Melamed, Intel senior vice president and general counsel, said during a teleconference from company headquarters in Santa Clara, Calif. “But now that we have been sued, we will aggressively defend ourselves.”

Intel is beating back antitrust cases around the world.

It is appealing a $1.45 billion fine in Europe and an $18.6 million fine in South Korea and is fighting a federal lawsuit by New York’s attorney general, all based on claims that Intel bullied computer makers into buying their microchips from Intel or risk losing billions of dollars in rebates.

Intel recently reached a $1.25 billion settlement with rival Advanced Micro Devices Inc. over similar claims.

Mr. Melamed said the FTC’s case is based largely on last-minute claims yet to be investigated - including ones about graphics processors that were raised as recently as last week. The FTC began its latest investigation of Intel in May 2008.

He also said the case is not based on law but rather an attempt to create new rules to regulate business conduct that will slow innovation and increase prices.

The case will appear before an FTC administrative law judge, not in federal court. Mr. Feinstein said the agency chose an administrative judge so the case could be concluded swiftly. He expects the case to begin in September and end by mid-2011.

The judge’s ruling will then go before the agency’s four commissioners. Intel can challenge the commissioners’ final decision in a court of appeal.

Mr. Feinstein said Intel will not have to pay a fine, only “restore competition,” if it loses the case. He also said the agency has no plans to break up the company.

Mr. Melamed said the case “could have and should have” been settled.

“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.”

Shares of Intel’s rivals rose Wednesday. AMD’s stock gained 45 cents, or 5.1 percent, to $9.27, and Nvidia’s shares were up $1.16, or 7.4 percent, to $16.81. Meanwhile, Intel’s stock fell 41 cents, or 2.1 percent, to end the day at $19.39 on the Nasdaq Stock Market.

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