US FTC sues Intel Corp

The United States Federal Trade Commission announced today that it has filed a lawsuit against Intel Corporation, charging that the company has illegally abused its market position to stifle competition and strengthen its monopoly.

“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. “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 its complaint, the FTC alleges that Intel has waged a calculated campaign to disenfranchise rival microchips by limiting their access to the market. In the process, the FTC claims, Intel deprived consumers of choice and innovation in CPUs, as well as lower prices. The FTC further alleges that Intel’s anticompetitive tactics were designed to halt the advance of superior or competing products that threatened to unhinge Intel’s monopoly.

In its announcement, the FTC specifically alleges that:

1. Intel used threats and rewards (“exclusive or restrictive dealing”) aimed at the world’s largest OEMs to coerce them into excluding rival chips as well as to prevent them from marketing products containing rival chips.
2. Intel secretly redesigned software compilers in a way that stunted the performance of competing processors to create the illusion of a performance advantage, even while telling OEMs that the differences were largely or entirely due to software.
3. Having sufficiently impaired the CPU market in its favor, Intel is now looking to impair the advances of superior competition in the GPU market, a market which threatens to erode the need for CPUs, and thus Intel’s monopoly.

According to the FTC’s complaint, Intel’s tactics violate Section 5 of the FTC Act, which is broader than antitrust laws and prohibits unfair and deceptive practices in competition and commerce.

To remedy the violation, the bureau intends to seek an order which would include provisions to bar Intel from using threats, bundled prices, or other offers to encourage exclusive deals, hamper competition or unfairly manipulate the prices of GPUs or CPUs. The FTC is also considering an order that would prohibit the firm from excluding or inhibiting the sale of competing products, and further prohibit the firm from manufacturing or offering products that impair the performance (or apparent performance) of non-Intel parts.

The lawsuit comes two weeks to the day after the FTC pledged to continue its probe into Intel’s anticompetitive practices. At the time, it was noted that Intel’s recent legal disputes with NVIDIA may constitute an effort to slow the company’s advances in the GPU market as well as an effort to intimidate OEMs from doing business with the company.

The vote to proceed with a lawsuit was approved by the FTC’s commissioners on a vote of 3-0; the matter will be heard before an Administrative Law Judge on September 15, 2010.