Online NewsHour: Intel vs. FTC -- June 8, 1998

DUE PROCESSOR

June 8, 1998

The NewsHour with Jim Lehrer Transcript

The Federal Trade Commission voted today three-to-one to file a complaint against the microprocessor giant Intel. They accused the corporation of abusing its monopoly and retaliating against rival companies. Following a background report on the case, the director of the FTC's Bureau of Competition and a former attorney for Intel discuss the case in separate interviews.

A RealAudio version of this segment is available.
NEWSHOUR LINKS:
June 8, 1998:
The Federal Trade Commission outlines its case against Intel.
May 18, 1998:
A report on the Microsoft antitrust case.
March 3, 1998:
Leaders of the computer industry testified against Microsoft.
January 14, 1998:
The search for a faster microprocessor.
January 13, 1998:
Microsoft's antitrust battle with the Department of Justice.
October 21, 1997:
The Justice Department charges Microsoft with building an illegal monopoly.
Browse the NewsHour's coverage of cyberspace and business.
OUTSIDE LINKS:
Intel
U.S. Federal Trade Commission

PHIL PONCE: We invited Intel to join us, but the company declined.
PHIL PONCE: With us now is Daniel Wall, an antitrust lawyer with the San Francisco-based firm of McCutcheon, Doyle, Brown, & Enersen. He's represented Intel before the FTC in the past.
"I think that in this instance that the government is on a very tenuous ground."

Welcome, Mr. Wall. Mr. Wall, does the government have a case?
DANIEL WALL, Antitrust Attorney: Well, I think the government is right to be concerned about the state of competition in the computer industry, because it is a very important industry and a main driver of the country's economy. But I think that in this instance that the government is on a very tenuous ground. This case is really not about the type of competition that one thinks the antitrust laws govern. That's competition in the marketplace. It's about a very different type of competition, the competition to prevail in a lawsuit. All of the conduct at issue occurred exclusively in the context of some sort of a patent dispute. There is no challenge being made to Intel's ordinary competitive strategies, its pricing, its dealings with customers and distributors, and I find that to be somewhat odd.
PHIL PONCE: So, Mr. Wall, are you saying that what Intel is being accused of is not something that was part of their normal flow of business, that these issues came up in the course of litigation?
DANIEL WALL: Well, that's right. Now, consider the general claim, which is that Intel has this great club over companies that are making computers out of its chips. Intel could conceivably use that club in a variety of ways, for example by refusing to offer information or products to customers that buy microprocessors from AMD or Cyrix, but it doesn't do that. Instead, it is being accused solely of having brought in the high hard heat when it was involved in some very high stakes patent litigation.
"One of the most fundamental principles in antitrust law is that they exist to protect consumers, not competitors."

PHIL PONCE: Do you agree with the -- Mr. Baer that Intel does have a significant club by virtue of its 90 percent market share?
DANIEL WALL: Intel's microprocessors are the world's standard, and if you build a business around those microprocessors, obviously, you're giving Intel a very strong club. But, again, that doesn't necessarily mean that antitrust issues are being presented. One of the most fundamental principles in antitrust law is that they exist to protect consumers, not competitors. And I think one of the FTC's great challenges in this case will be to demonstrate how it is that this practice, which has occurred in these litigation scenarios, harms the consumer.
PHIL PONCE: Are you saying that harm to consumers is not readily obvious to you at least?
DANIEL WALL: Well, it's not readily obvious to me, and when I read the FTC's complaint today, what I saw is that they simply allege that the natural and probable effects of Intel's conduct is to diminish incentives in the industry to develop new and improved microprocessor technology. That's what they're going to prove. It seems like a stretch.
"This is not about Intel's core competitive strategies."

PHIL PONCE: Mr. Wall, if the government were to prevail, what do you think the impact might be on Intel?
DANIEL WALL: Well, again, this is not about Intel's core competitive strategies. I think you can draw a contrast to the Microsoft case, which what everyone thinks about it is clearly about Microsoft's market strategies. This is about a litigation strategy that arises only when it -- when Intel finds itself in patent litigation, so I doubt it would have that kind of effect on Intel's business.
PHIL PONCE: Having raised the subject of Microsoft, do you see a connection between the two?
DANIEL WALL: Not really. I think that there is a visceral connection, because the government is going after two very high profile companies, but, like I said, the Microsoft case is very different. It is about competitive strategies in the market place, and whether you think that it's a good idea or a bit aggressive, you can at least recognize that it is the traditional stuff of antitrust. This is quite odd, because it, again, is about litigation tactics.
PHIL PONCE: But do you perceive a concern on the part of the government that perhaps too much power is being concentrated in the computer industry in too few companies?
DANIEL WALL: Oh, I think that comes through loud and clear in the government's complaint, and the FTC's administrative complaint, they are talking about the power of Intel and its market share, and so forth. But as Bill Baer acknowledged, that alone is not unlawful. That just gives you one of the elements of a monopolization case. The one at issue here is the monopoly conduct, whether this is the type of conduct that hurts consumers by substantially reducing the amount of competition that one sees in the marketplace.
PHIL PONCE: Mr. Wall, how is Intel perceived in the industry as far as their innovation, their aggressiveness, their creativity?
DANIEL WALL: Well, I don't think there are any companies in the economy that are perceived to be more innovative and dynamic than Intel. The company runs itself very, very hard, and it's constantly improving its products and innovating. And, indeed, many of these patents that become at issue in these cases are the fruits of that innovative effort.
The Intel defense?

PHIL PONCE: Mr. Wall, as someone who advises companies in matters like this, what is Intel's strategy apt to be at this point to fight this?
DANIEL WALL: Well, the FTC proceedings that have been started involve a fairly long administrative process. One of the things that Intel will have to do is take a lot of third party discovery of some of the companies that are involved in this. It will also have to marshal the side of the case that you won't see in any government complaint, the side that it will try to use to show that its dominant market strategies are not the type that the government alleges but involve trying to deliver the best products at the best prices.
PHIL PONCE: Mr. Wall, thank you for joining us.


Support the kind of journalism done by the NewsHour...Become a member of your local PBS station.

PBS Online Privacy Policy Copyright ©1996- MacNeil/Lehrer Productions. All Rights Reserved.