FTC Slaps Intel with Anticompetitive Suit

By Antonio Perez
Antonio Perez
Antonio Perez
December 16, 2009 Updated: October 1, 2015

The Federal Trade Commission is suing Intel Corp for stifling competititon. (Justin Sullivan/Getty Images)
The Federal Trade Commission is suing Intel Corp for stifling competititon. (Justin Sullivan/Getty Images)
NEW YORK—The U.S. Federal Trade Commission (FTC) on Wednesday sued semiconductor giant Intel Corp., accusing it of using its leading market position “to stifle competition and strengthen its monopoly” over more than a decade.

The antitrust complaint and investigation against Intel is the largest since the Clinton administration sued Microsoft Corp. 11 years ago.

The filing is the first of its kind brought against Intel by the FTC. Previously, New York Attorney General Andrew M. Cuomo and European regulators also accused Intel of anticompetitive behavior in marketing its computer central processing units (CPUs). The FTC’s charges also come a month after Intel settled for $1.25 billion outside of court with its longtime rival Advanced Micro Devices Inc. (AMD).

But the FTC’s charges go far beyond those levied by the European regulators, which focused on Intel’s core business of manufacturing core computer processors. The FTC accused Intel of anticompetitive behavior not only in marketing CPUs, but also computer graphics chips, affecting a whole new market.

According to the FTC’s complaint, Intel has tried to shut out rivals by cutting off their access to the marketplace by offering monetary rewards—and sometimes threats—to some of the world’s largest computer manufacturers, such as Dell and Hewlett-Packard.

“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 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.”

In addition, the FTC alleged that Intel has moved beyond CPUs to target makers of graphics processing units (GPUs) which serve as a computer’s graphics engine. The main makers of GPUs include Nvidia Corp. and AMD, which owns Canada-based ATI Technologies Inc.

The agency said that due to the recent innovation and technological advancements of the GPU, less reliance is placed on a computer’s central processing unit.

Intel Responds

In a statement, Intel general counsel Doug Melamed called the FTC’s suit “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, ” said Melamed.

Melamed was referring to the FTC using its statutory agency powers to regulate behavior that does not fit under the Clayton Act or the Sherman Act, the primary antitrust laws of the nation.

Intel did not comment on key details alleged by the FTC.

In a statement related to the FTC suit, graphics chipmaker Nvidia said, “We are particularly pleased to see scrutiny being placed on Intel’s behavior toward GPUs, which have become an increasingly important part of the PC industry.”

Shares of Intel (Nasdaq: INTC) fell by 2 percent in Wednesday afternoon trading. Intel is the world’s largest microprocessor maker, with 2008 annual revenues of almost $38 billion. It holds an 80 percent market share in the $32 billion computer processor industry.

Shares of Intel’s rivals jumped on the news of the FTC complaint on Wednesday. AMD shares increased by 3.7 percent while shares of Nvidia rose by more than 8 percent on Wednesday.