US regulators sue Intel

Computer microchip manufacturer Intel is in trouble again, with the US Federal Trade Commission suing the company for allegedly using its market position to suppress competition.

The suit comes after Intel has been dealing with similar claims across the world, including investigations led by corporate regulators in Europe which accuse the company of making deals with computer manufacturers to shut out rivals including AMD.

However, this case differs from the others by extending to graphics and software chips, not just the microprocessors used to control a computer’s entire processing power.

The FTC said in its complaint that Intel has used a campaign to shut out rivals from accessing the marketplace, depriving customers of choice. Additionally, the regulator said the company had used its market-leading position to “put the brakes on superior competitive products”.

“Intel has engaged in a deliberate campaign to hamstring competitive threats to its monopoly,” Richard Feinstein, director of the FTC’s Bureau of Competition said in a statement.

“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.”

The complaint alleges Intel used threats directed towards manufacturers such as Dell, Hewlett-Packard and IBM, in order to restrict them buying chips from rivals, the largest of which being AMD.

AMD and Intel have recently struck a $US1.25 billion deal that saw them finish up a four-year legal dispute regarding similar antitrust claims, but the FTC isn’t satisfied. Its other complaints include that:

• Intel secretly redesigned key software in a way that “stunted” the performance of rival CPU microchips. The company said software performed better on Intel CPUs, but the FTC says differences between its own and rival CPUs were due to “Intel’s compiler design”.
• There is a dangerous possibility Intel would extend its “unfair methods of competition” into the graphics CPU market.
• The company “misled and deceived” competitors.

The FTC is not seeking financial penalties, but an order that “includes provisions that would prevent Intel from using threats, bundled prices, or other offers to encourage exclusive deals, hamper competition, or unfairly manipulate the prices of its CPU or GPU chips”.

“The FTC also may seek an order prohibiting Intel from unreasonably excluding or inhibiting the sale of competitive CPUs or GPUs, and prohibiting Intel from making or distributing products that impair the performance–or apparent performance–of non-Intel CPUs or GPUs.”

Intel described the case as misguided.

“Intel has competed fairly and lawfully. Its actions have benefitted 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 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 matter is set to be heard before an Administrative Law Judge on 15 September, 2010.