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FTC accuses Intel of numerous violations, including writing software to sabotage its competitors' hardware

Intel holds a dominant position in the computer industry, with over 79.1 percent market share in the microprocessor market, according to iSuppli reports from the summer (these reports included by x86 architecture microprocessors as well as alternatives like ARM).  In May 2009 the European Union's antitrust regulators fined the chipmaker $1.45B USD -- about a fourth of the company's 2008 net income ($5.292B USD) -- for allegedly using discounts and OEM payoffs to push its smaller competitor Advanced Micro Devices out of the market.  That ruling is currently being appealed.

In the U.S. the Federal Trade Commission has investigated similar claims.  The State of New York has filed suit against the Santa Clara, Calif.-based company for antitrust violations, but thus far no federal litigation had been filed.  That all changed today with the FTC suing Intel, citing numerous antitrust violations.

The landmark case comes on the heels of Intel's $1.25B USD settlement with AMD over similar claims.  Under that agreement AMD agreed to drop all pending and present litigation against its rival.  According to the FTC's lawsuit filing, Intel is depriving customers of free choice and is stifling the progress of the computer industry.  The filing says that Intel employed a carrot-and-stick sort of approach, using both threats and rewards to keep OEMs from using its competitors' products.  Reportedly Intel used such targets on Dell Inc., Hewlett-Packard Co., and IBM Corp.

One of the more interesting aspects of the case is that the FTC claims to have evidence that Intel wrote compiler software (Intel makes one of the more commonly used commercial C++ code compilers, the Intel C++ Compiler) to sabotage the performance of its competitors' CPUs.  Little is known about this allegation at this point.

Richard Feinstein, director of the FTC's Bureau of Competition, says Intel's violations are blatant and alarming.  He states, "Intel has engaged in a deliberate campaign to hamstring competitive threats to its monopoly.  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 FTC case looks to prevent Intel from employing "threats, bundled prices, or other offers to encourage exclusive deals, hamper competition, or unfairly manipulate the prices of its" CPUs.

Intel was recently fined $25M USD by the South Korean government for antitrust violations.  The FTC's investigation of Intel was first announced officially in June 2008.  Under the more pro-antitrust Obama administration the investigation has pushed ahead aggressively and now looks to place new fines or restrictions on the chipmaker.


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RE: Kill the patents...
By Fritzr on 12/16/2009 10:47:06 PM , Rating: 2
If the price is prohibitive then by definition the license is prohibited.

If the cost of R&D+production+license exceeds what the market will pay then their is no product. Standard Oil was declared a monopoly and broken up for similar reasons. Standard HAD viable competition. Standard used their majority supplier status to wipe out their smaller competitors. Due to their size and ability to sell at a loss in selected markets they had a monopoly in spite of the existence of competitors who would have been viable in the absence of anti-competition actions taken by Standard Oil.

Intel today is in a similar position. They own the rights to the IAS (x86 instruction set) and get to decide who can build chips using the Intel designs. Theoretically a startup company can blackbox a new design that reacts in exactly the same manner as Intel's designs to the x86 hexcode, but that is a major expense that has to be financed in addition to designing a chip architecture that executes x86 code as efficiently as the Intel chips that will be on the market at the same time.

Currently as noted in the article AMD is a competitor in the sub $200 market. For the high performance chips Intel is the clear choice and this technical advantage gives them a monopoly in the above $200 market. Add aggressive marketing tactics that are intended, as much as possible, to prevent customers from choosing non-Intel options and you have a monopoly business actively preventing its competitors from entering the market and weakening Intel's ability to decide what will be sold.

Competitors are viable only if they are permitted to enter the market. Make the cost of entry to high to be financially viable and you will have no new companies entering the market. As long as the IAS patents continue to be held by Intel, Intel will be able to say who is or is not allowed to enter the x86 market. Until the effective monopoly OS supports non-x86 instruction sets Intel will continue to dominate the micro-computer CPU market.

Without the income generated by mainstream consumer sales the non-x86 chips will be minor players in the markets where they can compete, such as mainframes & supercomputers based on micro-computer CPUs.

This form of effective monopoly is one of the consequences of the Capitalist system. You can either accept the existence of monopolies along with the problems they can bring or you allow the government to be a little bit anti-Capitalist and have it force the monopoly to allow the competition to be viable competition, thereby forcing innovation by the monopolist to regain monopoly status.


RE: Kill the patents...
By weskurtz0081 on 12/17/2009 12:18:08 AM , Rating: 2
My only point is, Intel is NOT a monopoly. I am sure they have violated some of the Anti trust laws, but that doesn't mean they are a monopoly. People keep calling Intel a monopoly, my point is, they are not.

On the other hand, they have likely violated anti trust laws, they have probably been behaving in an anti competitive manner, and they deserve to suffer the consequences. That is my point.

Also, I want to point out, Intel might hold a monopoly in the higher end desktop chips, but not in the enterprise space.


RE: Kill the patents...
By Fritzr on 12/17/2009 9:52:21 PM , Rating: 2
If you are talking to a lawyer then the word is "trust". That refers to a company or consortium that has the power to dictate pricing, availability and permission to market.

In practical terms a trust has monopoly power and uses that power to prevent others from joining the market. In common street parlance a trust under the Sherman Anti-Trust Act and similar legislation is referred to as a monopoly.

True, Webster's dictionary and the Oxford English Dictionary define a monopoly as the complete absence of competition, however the government does regulate effective monopolies through the Anti-Trust legislation and when not reading the text of the legislation commonly refers to these companies as monopolies or wielding monopoly power.

I am surprised that you ended your last comment by stating your position in the terms that I have just stated by saying that in high end chips...
quote:
Also, I want to point out, Intel might hold a monopoly in the higher end desktop chips, but not in the enterprise space.
Intel has competition in the high end desktop, though the percentage is low. By your stated definition Intel does not have a monopoly in that category, they only have most of the market not all of it. The price points do allow some sales to go to the slightly less efficient high end offerings of AMD.


RE: Kill the patents...
By weskurtz0081 on 12/17/2009 10:22:04 PM , Rating: 2
Yeah, probably shouldn't have used the word monopoly, it wasn't appropriate, I was just typing away and busy working and trying to respond.

I am referring to a monopoly in the terms of economics. And, according to economics, Intel DOES have monopoly power, but it doesn't make them a monopoly.

Regardless of who I am talking to, Intel isn't a monopoly by definition, it just isn't.

It doesn't mean they cannot harm competitors or make market entrance difficult, because they likely have been doing both, but there is not an absence of competition.

Intel does not have a monopoly in high end desktop chips, I was thinking more in the terms of performance when I wrote that, and thinking of performance only, they have no competition. No other company makes a CPU that is as fast as Intel in the high end desktop arena. But, it doesn't mean they have a monopoly, I simple mispoke, used the wrong terminology, what have you.


RE: Kill the patents...
By weskurtz0081 on 12/17/2009 10:22:05 PM , Rating: 2
Yeah, probably shouldn't have used the word monopoly, it wasn't appropriate, I was just typing away and busy working and trying to respond.

I am referring to a monopoly in the terms of economics. And, according to economics, Intel DOES have monopoly power, but it doesn't make them a monopoly.

Regardless of who I am talking to, Intel isn't a monopoly by definition, it just isn't.

It doesn't mean they cannot harm competitors or make market entrance difficult, because they likely have been doing both, but there is not an absence of competition.

Intel does not have a monopoly in high end desktop chips, I was thinking more in the terms of performance when I wrote that, and thinking of performance only, they have no competition. No other company makes a CPU that is as fast as Intel in the high end desktop arena. But, it doesn't mean they have a monopoly, I simple mispoke, used the wrong terminology, what have you.


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