FTC Sues Intel over Anticompetitive Behavior

Intel’s $1.25 billion settlement last month with rival Advanced Micro Devices apparently has done little to keep regulators from investigating the chip maker’s business practices.

The Federal Trade Commission announced Dec. 16 that it is suing Intel for what regulators say is anticompetitive behavior that Intel has been exhibiting for more than a decade, first against AMD and now against graphics chip maker Nvidia.

The FTC is accusing Intel not only of using its stronghold on the CPU market to coerce OEMs such as IBM, Hewlett-Packard and Dell into limiting their use of AMD products, but also of secretly altering its own technologies—such as compilers—to hinder the performance of competitive products.

Intel officials could then tell customers that applications performed better on Intel’s technology than on AMD’s without disclosing that the difference in performance was due primarily to Intel’s actions.

“Intel has engaged in a deliberate campaign to hamstring competitive threats to its monopoly,” Richard Feinstein, director of the FTC’s Bureau of Competition, said in a statement. “It’s been running roughshod over the principles of fair play and laws protecting competition on the merits.”

Many industry observers felt that the FTC would not continue its pursuit of Intel after the chip maker’s settlement with AMD, which not only included the $1.25 billion payment but also an agreement not to engage in particular anticompetitive behavior.

However, the FTC’s complaint not only covers Intel’s actions in relation to AMD, but also its behavior toward Nvidia. Intel is suing Nvidia over whether the GPU maker has the right to develop chip sets for Intel processors based on the “Nehalem” architecture. The two companies in 2004 signed an agreement allowing Nvidia to make compatible chip sets for Intel processors. Intel officials said the agreement didn’t cover Nehalem or future microarchitectures.

GPUs are growing in importance in general computing environments, and Intel is working to bring greater graphics capabilities to its own CPUs. AMD likewise is growing its graphics business, which it acquired in 2006 with the $5.4 billion acquisition of ATI.

In its complaint, the FTC says that Intel is now engaging in anticompetitive practices against Nvidia that are similar to what the chip maker had engaged in against AMD. The result is that those practices could enable Intel to extend its monopoly into the GPU market, according to federal regulators.

Roger Kay, an analyst with Endpoint Technologies Associates, said the Nvidia issue could have been enough to convince the FTC to continue its probe even after Intel’s settlement with AMD.

In addition, some could also see the settlement as just another way of Intel using its money and power to thwart competitors, Kay said.

“One interpretation of the AMD settlement is that Intel is buying someone off to just shut them up,” he said.

The FTC lawsuit adds to the legal woes facing Intel, which already is appealing a $1.45 billion fine levied by the European Commission for similar bad behavior in that region. In addition, the N.Y. Attorney General’s office is suing Intel for its behavior in bullying OEMs and clamping down on competition from AMD.

A key difference with the FTC complaint is that it charges Intel with violating the FTC Act, rather than antitrust laws. The FTC Act is broader than antitrust laws, and can take into account unfair methods of competition, deceptive acts and monopolistic behavior.