FTC Accuses Intel Of Stifling Competition

The Federal Trade Commission is suing Intel Corp., accusing the company of using its dominance of the computer chip industry to thwart competition. The FTC says Intel coerced computer manufacturers such as Dell and Hewlett Packard to use its chips and not those of its rivals. Intel called the suit "misguided."

Copyright © 2009 NPR. For personal, noncommercial use only. See Terms of Use. For other uses, prior permission required.

ROBERT SIEGEL, host:

From NPR News, this is ALL THINGS CONSIDERED. I'm Robert Siegel.

MELISSA BLOCK, host:

And I'm Melissa Block.

The European Commission ended one of the world's longest running antitrust battles today by settling with Microsoft. But just as that decade-old case is ending, another antitrust battle is now intensifying.

Today, the Federal Trade Commission announced that it is suing Intel. FTC officials say the company used its dominance in the computer chip business to stifle competition and punish those who did business with its rivals.

NPR's Jim Zarroli reports.

JIM ZARROLI: With the annual revenue of $37 billion, Intel is far and away the world's biggest manufacturer of computer chips. The FTC says it controls 75 to 80 percent of the chip market. And Richard Feinstein, who directs the FTC's Bureau of Competition, says it knows how to use its power.

Mr. RICHARD FEINSTEIN (Director, Bureau of Competition, Federal Trade Commission): Intel has for many years been the dominant manufacturer of those chips. And we've alleged that they have engaged in a variety of conduct that has enabled them to maintain and prolong that dominance.

ZARROLI: It did that, the FTC says, by punishing computer makers that bought too many chips from any of its rivals. It says even major computer makers like IBM and Hewlett-Packard were forced to play ball. If they did business with anyone else, Intel would allegedly raise prices, shut off supply and withdraw marketing support.

Mr. FEINSTEIN: All of which, taken collectively, had the effect of communicating very effectively to their customers that they would be penalized for doing a substantial amount of business with Intel's competitors.

ZARROLI: The government also accuses Intel of manipulating technical data to make its chips look more powerful than those sold by other companies. Much of what's in this suit isn't new. Intel has faced similar accusations from the New York attorney general's office, as well as European and Asian regulators.

The company recently agreed to pay a billion and a quarter dollars to settle a lawsuit from Advanced Micro Devices that made similar charges. But the FTC added some allegations involving a new kind of rival chip used for computer video applications.

The government says Intel refused to let the new chips operate alongside its own, making them a lot less desirable for computer makers. U.S. officials said this was an attempt to kill off a competing product. Intel spokesman Chuck Mulloy says it was just a contract dispute. As for the suit filed today, Mulloy says Intel tried to settle the case.

Mr. CHUCK MULLOY (Spokesman, Intel Corporation): But the commission at the 11th hour decided to add new allegations, new charges, made new demands that they did not investigate.

ZARROLI: Mulloy says the talks fell apart because the FTC made unreasonable demands on the company.

Mr. MULLOY: They have essentially said under almost no circumstances can Intel discount its products going forward. At the end of the day, if that ends up being the law of the land, prices will increase for microprocessors.

ZARROLI: For its part, the government isn't asking for any monetary damages against Intel. Instead, it wants the company to promise to change its business practices. But Intel maintains that it has done nothing wrong. The case will be heard by an administrative law judge, and Intel is free to appeal any ruling the judge makes.

Jim Zarroli, NPR News, New York.

Copyright © 2009 NPR. All rights reserved. No quotes from the materials contained herein may be used in any media without attribution to NPR. This transcript is provided for personal, noncommercial use only, pursuant to our Terms of Use. Any other use requires NPR's prior permission. Visit our permissions page for further information.

NPR transcripts are created on a rush deadline by a contractor for NPR, and accuracy and availability may vary. This text may not be in its final form and may be updated or revised in the future. Please be aware that the authoritative record of NPR's programming is the audio.

Comments

 

Please keep your community civil. All comments must follow the NPR.org Community rules and terms of use, and will be moderated prior to posting. NPR reserves the right to use the comments we receive, in whole or in part, and to use the commenter's name and location, in any medium. See also the Terms of Use, Privacy Policy and Community FAQ.