In a sharply worded response to the complaint filed by the FTC, Intel says the agency has no understanding of the processor business and has faulty knowledge of graphics technology. Intel also says that innovation by Intel and rivals like AMD and Nvidia has vastly improved computer quality while driving down costs, and claims that the FTC's proposed remedies go far beyond antitrust precedence set by the Supreme Court.
Intel officials are hitting back at the Federal Trade Commission, saying the
agency has little understanding of the microprocessor business and that its
lawsuit against the chip maker contradicts established antitrust laws.
In their 25-page official response to the lawsuit filed by the FTC in
December, Intel officials strongly defend their business practices, saying that
contrary to FTC claims, innovation has flourished in the processor market,
resulting in higher performing PCs that steadily have dropped in price.
"The [FTC] Complaint paints a picture of competition for microprocessors and
graphics products that bears little resemblance to reality." Intel's response
says. "Competition in these sectors has been robust during the period covered
by the Complaint, producing greater consumer benefits than any other sector of
The FTC filed its complaint Dec. 16, claiming that Intel's business
practices created an unfair competitive market for processors, echoing concerns
that other organizations-including main rival Advanced Micro Devices, the European
and the N.Y.
Attorney General's Office
-have made over the past few years.
As in the prior complaints and lawsuits, the FTC said that over the past
decade, Intel has used its dominance in the x86 processor space to coerce
systems makers like Hewlett-Packard, Dell and IBM
into limiting their use of products from AMD.
In addition, the agency claims that Intel altered some of its technology-such
as compilers-to hinder the performance of products from AMD
and other competitors.
In going a step further, the FTC also said that Intel is practicing the same
business methods in the graphics
in its burgeoning competition with Nvidia.
In its sharply worded response, dated Dec. 31, Intel disputes the
allegations and the FTC's proposed remedies. The increase in R&D spending
over the past few years by both AMD and
Nvidia illustrates the room for competition and innovation in the market,
according to Intel, and contrary to the FTC's claims, Intel has not
intentionally slowed its own innovation.
"The large increases in AMD's and
Nvidia's R&D expenditures over the period of alleged predation speak
volumes to the opportunities available to Intel's competitors," the response
reads. "These investments, and the combination of dramatic increases in product
quality and unparalleled reductions in prices, provide the true measure of
competition in the microprocessor and graphics industries."
Intel also criticizes the FTC for what the chip maker says is its lack of
understanding of the CPU and graphics markets, and says that much of AMD's
problems in the years since releasing its Athlon and Opteron processors had
more to do with issues surrounding AMD's
ability to execute and not with competition from Intel.
Intel also dismisses issues surrounding giving Dell and others special
pricing based on volume as routine business practices protected by rulings made
by the Supreme Court in unrelated cases.
"The offer of a lower price for more volume necessarily implies that the
lower price is contingent on the additional volume," Intel says. "The Complaint
seeks-by using words such as -threats' and -exclusionary'-to transform
procompetitive, above-cost price reductions aimed at winning additional sales
into something sinister. But the Supreme Court has repeatedly declared such
above-cost discounting to be entirely lawful."
Intel officials dispute calls by the FTC that they should open up their
technology for use by competitors as a remedy. Such a move would hinder Intel's
ability to innovate and compete, the chip maker says.
"Contrary to well-accepted antitrust principles, the Complaint treats Intel
as if it were a public entity that has an ongoing duty to help competitors,"
Intel says. "That approach reaches into every corner of the case, however
inconsequential. ... The relief contemplated by the Complaint would require Intel
to delay or even forgo product improvements unless it could simultaneously
ensure that such improvements equally benefited Intel competitors, essentially
requiring Intel to design its products for the benefit of its competitors
rather than for its own benefit and the benefit of consumers."
Intel further criticizes the FTC for pursuing the complaint under the FTC
Act rather than in the courts, and says the agency is going beyond the
regulations laid out in the act and is using the FTC Act to defy Supreme Court
precedence. Intel is accusing the FTC of trying to micromanage Intel's
business, to the point of deciding which patents Intel should be able to
The agency's interpretation of Section 5 of the FTC Act is "vague, novel, and in important respects
inconsistent with existing antitrust standards."
The FTC said last month that it expects a trial on the issues before an
administrative judge to start in September.
Intel spent much of 2009 defending itself against claims of anti-competitive
practices. Though the chip maker settled
its legal disputes
with AMD in December
in an agreement that included a $1.25 billion payment, it still is appealing a
$1.45 billion fine levied by the European Commission earlier in the year.
In addition, Intel is disputing a lawsuit filed by the N.Y. Attorney