The Federal Trade Commission filed suit today against Intel Corp., charging the chip maker with using its dominant market position to illegally stifle competition.
It's the latest antitrust blow to Intel, which has already shelled out $2.7 billion this year in connection with cases brought by European regulators and Advanced Micro Devices. The company also faces an antitrust suit brought by the attorney general of New York.
At a press conference, FTC Bureau of Competition Director Richard Feinstein said Intel's anticompetitive conduct stretches back 10 years. "At each stage when Intel's dominance has been threatened, they have responded not by simply competing aggressively on the merits, but with conduct that is exclusionary and detrimental to competition and consumers.”
In its administrative complaint, the FTC charges Intel with violating Section 5 of the Federal Trade Commission Act. The agency alleges that Intel used illegal threats and rewards to coerce the world’s biggest computer makers not to buy chips made by rivals, and secretly redesigned key software, known as a compiler, in a way that deliberately stunted the performance of competitors’ CPU chips.
The FTC complaint also focuses on the market for graphics processing units, or GPUs. The complaint alleges that Intel’s unfair methods of competition could allow it to extend its monopoly to this market – allegations that have not been raised in other antitrust suits against Intel, said Feinstein.
In May, the European Commission fined Intel a record $1.45 billion for anticompetitive behavior. And last month, Intel paid rival AMD $1.25 billion to settle long-running antitrust and patent suits.
The FTC is not seeking monetary penalties or divestitures. Instead, it wants to force Intel to change its conduct, with remedies ranging from how its products are priced to limits on the company’s ability to bundle products to requiring corrections of deceptive statements it has made in the past.
Intel’s new general counsel, A. Douglas Melamed, who was a partner at Wilmer Cutler Pickering Hale and Dorr until last month, said in a statement, “This case could have, and should have, been settled. Settlement talks had progressed very far but stalled when the FTC insisted on unprecedented remedies -- including the restrictions on lawful price competition and enforcement of intellectual property rights set forth in the complaint -- that would make it impossible for Intel to conduct business."
Feinstein said he expects the FTC case to go to trial before an administrative law judge in September, and that an initial decision could come as soon as a year from now.
Intel’s Melamed knows first hand what the company is in for. In private practice, he represented chip designed Rambus Inc. in a comparable FTC case – one that illustrates the pitfalls of administrative litigation where agency commissioners can overrule the trial judge.
In Rambus’s case, FTC administrative law judge Stephen McGuire in 2004 issued a 334 page decision that found the company did not illegally monopolize crucial chip technologies. But the FTC commissioners rejected the judge’s findings and ruled the company did. Rambus appealed to the U.S. Court of Appeals for the D.C. Circuit, and in 2008- after six years of litigation with the FTC - the court overturned the commissioners’ decision.
Intel’s lead outside counsel for antitrust cases has been Robert Cooper, a partner in the Los Angeles office of Gibson, Dunn & Crutcher. He could not be immediately reached for comment.
The FTC commissioners voted 3-0 to bring the case, with Commissioner William Kovacic recused, and Commissioner Thomas Rosch issuing a separate statement dissenting in part.