The U.S. Federal Trade Commission sued Intel Corp. (Nasdaq: INTC) yesterday (Wednesday) accusing the world's leading computer chipmaker of illegally using pricing deals and other tactics "to stifle competition and strengthen its monopoly."
The complaint says Intel tried to block "superior" products by rivals and deprived consumers of choice and innovation for 10 years.
"Intel has engaged in a deliberate campaign to hamstring competitive threats to its monopoly," said Richard A. Feinstein, the FTC's director of competition.
Intel says it "has competed fairly and lawfully," and characterized the complaint as "misguided." The company accused the agency of rushing the lawsuit without fully investigating and that prices are declining at a faster rate than in any other industry.
Intel dominates the market for computer chips with more than 80% of the world's computer makers opting for its Central Processing Unit (CPU) chips.
Intel has contended with antitrust probes for years and last month agreed to pay $1.25 billion to No. 2 chipmaker Advanced Micro Devices Inc. (NYSE: AMD) to settle a four-year-old lawsuit.
In AMD's suit, Gateway executives said Intel beat them "into guacamole" with threats about working with AMD, and a Toshiba Corp. manager said Intel's financial incentives for not working with the competition compared to cocaine, MSNBC reported.
The new suit is similar to previous actions taken against Intel by the FTC when it alleged the company stifled competition by threatening and rewarding PC makers like Dell Inc. (Nasdaq: DELL), Hewlett-Packard Co. (NYSE: HPQ), and International Business Machines Corp. (NYSE: IBM).
But the suit also contains a new charge, alleging that Intel "secretly redesigned key software, known as a compiler, in a way that deliberately stunted the performance of competitors' CPU chips," PC Magazine reported.
"Intel told its customers and the public that software performed better on Intel CPUs than on competitors' CPUs, but the company deceived them by failing to disclose that these differences were due largely or entirely to Intel's compiler design." the FTC said.
The agency may seek an order prohibiting Intel from making or distributing products that impair the performance–or apparent performance–of non-Intel CPUs or graphics processing units (GPU), PC Magazine says.
However, Intel isn't harmed by billion- dollar fines and AMD doesn't have the products to challenge its dominance Gus Richard, an analyst at Piper Jaffray Cos. (NYSE: PJC) told Bloomberg News.
Intel may "get slapped and pay a fine," Richard said. But "Intel, technologically, is pulling away from AMD. A settlement may level the playing field, but it won't aid AMD or hurt Intel significantly."
News of the new FTC action against Intel came on the same day that the European Union (EU) said it was dropping antitrust charges against Microsoft Corp. (Nasdaq: MSFT).
The European Union signaled it would accept a settlement proposal outlined this summer by Microsoft that would end antitrust charges over the Internet Explorer Web browser, nearly resolving close to a decade of battles with the European Commission (EC).
The EC, the EU's executive arm, had accused Microsoft of anticompetitive actions by bundling Internet Explorer with its Windows operating system, giving it an artificial distribution advantage.
The commission said Wednesday that it will "market test" the proposal which would give Windows users in Europe s a choice of up to 12 other Web browsers. The test is seen as a mere formality since the software has already met with approval from Microsoft's main competitors, including Google Inc. (Nasdaq: GOOG) and the Mozilla Foundation.
Both the EU's competition commissioner, Neelie Kroes, and Microsoft's general counsel, Brad Smith, said they expected the case to be wrapped up before year end
Smith told The Wall Street Journal the company was pleased with the decision "which approves a final resolution of several longstanding competition law issues in Europe," adding that Microsoft was looking forward to deepening the "trust" that has been established between Microsoft and the EC in recent months.
News & Related Story Links:
- Federal Trade Commission:
FTC Challenges Intel's Dominance of Worldwide Microprocessor Markets
- Money Morning:
Investment News Briefs
Feds accuse Intel of stifling competition
FTC Sues Intel for Anticompetitive Practices
- Bloomberg News:
Intel Accused by U.S. of Illegal Monopoly Practices
- The Wall Street Journal:
EU Formally Ends Microsoft Antitrust Case