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The FTC announced Friday that it will formally examine whether Intel abused its dominant position

Somewhere at the headquarters of AMD, there must have been a cheer that went up on Friday.  After months of losing ground to Intel, employee layoffs, and under the shadow of Intel's looming Nehalem architecture, the company finally had some good news to be happy about.

It’s no small mystery that AMD these days simply seems incapable of outcompeting Intel.  Intel argues that this is due to its superior products.  AMD, however, has long maintained that Intel was deploying anticompetitive processes, which it says are digging it into a hole from which it cannot escape.  However, despite a passionate ad campaign and lengthy discussions with antitrust officials in the U.S., AMD has seemingly had a tough time selling its idea that Intel was cheating in the microprocessor war.

The U.S. Federal Trade Commission (FTC), which supervises free trade in the U.S., announced that it was launching a formal antitrust investigation against Intel.  The stakes are high for both Intel and AMD; the total market for microprocessors racked up $225 billion in sales last year. 

Both Intel and AMD realize what’s at stake and have spent tens of millions in legal expenses and on public relations campaigns.  AMD had previous success in Europe, Korea, and Japan -- all of which have investigated Intel or threatened it with possible fines.  However, the biggest victory -- a U.S. antitrust investigation -- seemed out of reach until this week.

State authorities and federal appointees from the Bush administration have been taking a more lenient approach to antitrust that their European counterparts.  However, the major decision Friday marked a sharp new shift in policy. 

The new investigation originated with the new blood -- William E. Kovacic, the new chairman of the trade commission.  With the backing of his fellow commissioners, he reversed the decision of Deborah P. Majoras, the previous chair, who had been blocking the investigation for months to the frustration of those on Capitol Hill.  Majoras was a more lenient appointee, and helped work out the antitrust settlement in 2001 with Microsoft.

It will take months before formal charges against Intel might be made, so the upcoming administration’s stance will greatly factor into the case.  AMD is relying on the federal case as only one state -- New York, at the behest of attorney general Andrew M. Cuomo -- has agreed to investigate Intel on a state level.  California attorney general Jerry Brown denied AMD's pleas, derisively commenting that he was "not barking at every truck that comes down the street."

D. Bruce Sewell, Intel’s senior vice president and general counsel, says that the U.S. antitrust laws are different than European ones, and it will not be charged.  Intel is planning on racking up its Capitol Hill efforts, though, likely in the form of lobbyist dollars.

The first signs of the upcoming bad news for Intel appeared when chip manufacturers began to get subpoenaed by the FTC.  The FTC is working with Europe and other foreign governments to obtain evidence to use against Intel in a possible case.  Mr. Sewell said that he was working amiably with the FTC on a less formal review since 2006 and that Intel would remain cooperative.

AMD's top executives expressed their pleasure over the Commission's decision.  Tom McCoy, executive vice president for legal affairs at AMD, stated, "Intel must now answer to the Federal Trade Commission, which is the appropriate way to determine the impact of Intel practices on U.S. consumers and technology businesses.  In every country around the world where Intel’s business practices have been investigated, including the decision by South Korea this week, antitrust regulators have taken action."

The largest U.S. antitrust investigation since the Microsoft one of the 90s came the same week as more good news for AMD; Korean officials slammed Intel with a $25 million fine for violating its fair trade laws.  The Korean officials discovered that Intel illegally paid Samsung Electronics and the Trigem Company $37 million in payments between 2002 and 2005 to not buy AMD processors.  The European Union's European Commission (EC), which charged Intel with "the aim of excluding its main rival from the market" is expected to expand its charges this year.

Intel currently owns somewhere between 80 to 90 percent of the worldwide microprocessor market.  Many U.S. citizens do not realize that U.S. laws do allow monopolies, unlike elsewhere, but forbid companies with a monopoly from using its dominance to restrict competition.

With mounting evidence worldwide, Intel faces a tough case before the FTC.  However, it will likely do what it takes, or perhaps more aptly write the lobbyist checks needed to prevent it from becoming the next Microsoft.  Meanwhile, AMD will also likely step up its efforts in hopes that it can stop its downhill slide by a court victory over Intel.



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Important
By pauldovi on 6/8/2008 12:51:50 AM , Rating: 1
In the US anti-trust laws are based around the consumer where-as European ones are based around the company. The FCT will find that consumers are not being hurt by Intel's position and will determine no laws are being broken.




RE: Important
By oab on 6/8/2008 1:07:04 AM , Rating: 2
I was hurt by not being able to buy a brand I liked with a superior performance processor when Intel paid Dell the "customer retention" bonuses for not selling AMD products.

ahh, who am I kidding, I haven't bought a name-brand desktop since '99


RE: Important
By ATWindsor on 6/8/2008 2:04:02 AM , Rating: 2
It really shouldn't make a diffrence (in theory at least), if you use the dominating position to hurt the other companies in other ways than having the best product (or hampering the free competition as I like to see it), it will hurt the customers also. Hurting the free compettition IS hurting the customer.


RE: Important
By Ringold on 6/8/2008 4:21:46 AM , Rating: 2
quote:
The FCT will find that consumers are not being hurt by Intel's position and will determine no laws are being broken.


Notice all the M&A activity lately? The Economist, WSJ, and I think IBD have all noted the possibility that the next administration may not take the traditional US position on such matters, including anti-trust. If AMD can keep the issue alive and pray for an Obama victory, then its possible Obama appointees may take a position far closer to the European market-interventionist position than what we've had previously.

That's my speculation at least, as it makes a bit of sense. Even a McCain White House still would have a hostile Senate to get appointees past, so from the perspective of a rent-seeking corporation, that may bode well. If anyone doubts that Democrats would play politics with such an comission and its policies, they need only to look at Dodd and his blatant assault in the Fed Reserve's political independence, only the second such violation I'm aware of since 1951. (The last time was Carter appointing Miller, who put us on the course to hyperinflation before Carter wised up and appointed Volcker)


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