FTC Accuses Intel of Stifling Competition

 

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The Federal Trade Commission sued Intel* Wednesday, accusing the world’s biggest chipmaker of using illegal tactics to stifle its competition.

The FTC accused Intel, which supplies about 80 percent of the world’s microprocessors, of waging “a systematic campaign to shut out rivals.”

“What the FTC is alleging is that Intel has used its market power to convince computer markers not to use chips from their competitor, a company called Advanced Micro Devices, or AMD,” Arik Hesseldahl, senior technology writer for Bloomberg Business Week, told the NewsHour.

“The tools they allegedly used were things like volume discounts,” according to Hesseldahl. “Say you’re Hewlett Packard. The accusations have been that Intel would sell you a certain number of chips and offer you a discount, but say that if you were to use AMD as well, that discount would be smaller, or you might not get it at all. Those are the kinds of allegations that have been made. Intel has said that these are just volume discounts and that they’re legal and that they had nothing to do with PC makers using or not using AMD. But it has been accused of tying these discounts in this way.”

The suit, the culmination of a year-long investigation, echoes charges already brought against the company in the European Union, Japan, and South Korea. In March, the European Union fined Intel $1.45 billion for similar violations. And last month, Intel agreed to pay rival AMD a $1.25 billion settlement for allegations that echo may of those made by the FTC.

“From a political perspective, it is a very big deal that the FTC is initiating such a wide-ranging case against such a high-profile firm,” Howard University Law Professor Andrew Gavil told the NewsHour today. “It is…accurate to view the Intel case as by far the most significant public monopolization case to be initiated by the federal government since the Microsoft case in 1998.”

Intel responded to the suit in a statement Wednesday.

“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.”

“If you take Intel’s argument [about consumers],” says Hesseldahl, “they will argue…and they would be correct, that prices on computer chips have come down over time.” But AMD and the FTC would argue “that consumers are harmed when limits are placed on choice in the marketplace. Intel’s market share is so overwhelmingly large that it can arguably use its considerable resources to have a significant effect on the entire industry.”

*For the record, Intel is a NewsHour underwriter.
With additional reporting by Beth Summers.

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