Intel agrees to a set of restrictions in its business practices as part of a settlement to resolve an antitrust lawsuit brought by the FTC. Intel has not admitted to any wrongdoing.
Intel can no longer use its market dominance and money to hinder competition
from the likes of Advanced Micro Devices and Nvidia, according to an agreement
between the giant chip maker and the Federal Trade Commission announced Aug. 4.
The agreement resolves
a lawsuit filed against Intel
in December 2009 in which federal regulators
said the company used a combination of conditional financial payments and
coercion to convince OEMs to limit their use of competing products from AMD,
Nvidia and Via Technologies. The FTC also accused Intel of altering some of its
technologies to hamper the performance of products from AMD
The result was an anti-competitive environment that stunted
innovation, reduced choices and kept prices higher than necessary, according to
Jon Leibowitz, chairman of the FTC.
is designed to ensure that doesn't happen again, Leibowitz
said during a conference call with journalists.
Reaching an agreement was important to avoid years of
litigation, he said. Consumers will feel the results quickly.
"It provides this relief right away, so it helps consumers
now, which is critical in a dynamic industry such as this one," Leibowitz
Intel officials said they were happy to put the lawsuit behind
them, and noted that they did not admit to violating any antitrust laws nor to
any allegations in the FTC lawsuit.
"This agreement provides a framework that will allow us to
continue to compete and to provide our customers the best possible products at
the best prices," Doug Melamed, Intel senior vice president and general
counsel, said in a statement. "The settlement enables us to put an end to
the expense and distraction of the FTC litigation."
The FTC will conduct a 30-day public comment period on the
settlement, then make a final vote on it.
Intel has been hammered for several years by allegations of
using unfair business practices to illegally hold down competition from AMD.
FTC was the first regulatory body to allege that Intel had used similar
practices in its dealings with Nvidia in the growing graphics space.
In this case, Leibowitz said Intel's "disturbing
behavior" had been going on for a decade. That behavior, he said, included
using conditional rebates and discounts, as well as threats, against OEMs to
limit their use of AMD and Nvidia products.
The FTC also claimed that Intel altered some of its technologies-such as
compilers-to weaken the performance of AMD
"If Mother Teresa ran a chip company, she probably
wouldn't participate in this kind of practice, but it wouldn't be
illegal," he said.
What was troubling was that Intel officials made it sound as
though problems with AMD's products, and not
their own changes of Intel technologies, caused the poor performance,
convincing OEMs that the issue had to do with AMD
As part of the settlement, Intel is not allowed to alter its
technologies to harm competitors, must modify intellectual property agreements
with AMD, Nvidia and Via to enable them to
create mergers and joint ventures with other vendors without fear of being sued
by Intel over patent infringements, must extend Via's x86 licensing agreement
to 2018, and must keep the PCI Express Bus interface for at least six years to
ensure that the performance of GPUs is not harmed.
Intel also will create a $10 million fund to reimburse software
developers who must recompile their code to work with competing products.
Officials from AMD and
Nvidia applauded the FTC's actions.
"The FTC has acted firmly in the interest of American
consumers to safeguard the competitive process in the critically important
microprocessor and graphics markets," AMD
officials said in a statement. "A level playing field is AMD's
goal, and we are confident that our world-class computing and graphics
processors will deliver great value and benefit to consumers in a fair and open
"Nvidia supports the FTC's action to address Intel's
continuing global anticompetitive conduct," said a statement from the
graphics maker, which is suing Intel over its business practices. "Any
steps that lead a more competitive environment for our industry are good for
the consumer. We look forward to Intel's actions being examined further by
the Delaware courts later this
year, when our lawsuit against the company is heard."
Ed Black, president and CEO
of the Computer and Communications Industry Association, also was pleased with
the settlement, but warned that its effectiveness depended on the FTC's
enforcement and Intel's good-faith efforts.
"I have seen well-intentioned antitrust actions completely
gutted during the enforcement process," Black said. "If Intel is serious
about returning to good standing then it must live by the spirit of the
settlement, not just its letter. Whether it does or not remains to be
He said the FTC has shown more foresight in this settlement
than other agencies have in past actions against Intel.
Joe Clabby, an analyst with Clabby Analytics, said he normally
supports a hands-off approach to business competition, with as little
government intervention as possible. However, in cases like Intel using its
strong market presence and money to unfairly hurt competitors, such
intervention is important, he said.
"I'm all for punishing giants that behave in this
manner," Clabby said in an interview with eWEEK, adding that such actions
will change Intel's practices. "I think they're getting the message ... and
hopefully this [will curb] their behavior."
The problem, he said, is that "Intel does stupid
things." One of those things was taking over the Itanium project from
Hewlett-Packard more than a decade ago, and early on, in an effort to make the
processor the high-end chip platform of the future, stunted the growth of its
x86 Xeon portfolio. This created an opportunity for AMD
to make a strong move in the x86 market, which it did in 2003 with Opteron.
It helped give a struggling AMD
a boost, but ultimately Intel got back into the game with greater innovation
"I think [Intel's] business practices were stupid, but
[the company] is competing very well in the technology space," Clabby
Intel owns about an 80 percent share of the global processor
The FTC lawsuit is only the latest legal situation to be
settled by Intel. In 2009, the European Commission fined Intel $1.45 billion
for similar practices on that continent-a fine Intel is appealing-and the
settlement with AMD included a $1.25 billion
However, Intel still faces lawsuits from Nvidia and the N.Y.
Attorney General's Office. Intel
won a ruling on July 28
in another case, in which a special master for a
U.S. District Court ruled against a request for a class action consumer suit
Dell got itself into its own legal mess because of its
relationship with Intel. Dell
settled an investigation by the Securities and Exchange Commission
million-and another $4 million to be paid by CEO
Michael Dell-for accounting issues surrounding payments from Intel. According
to the SEC, Intel paid Dell millions of dollars into 2007 to not use AMD
products, money that Dell used to prop up its struggling financial situation.
After Dell announced in 2007 that it was going to use AMD
products, much of the Intel money went away, leading to a drastic drop in
Dell's operating budget. Dell executives never let shareholders know how
important the Intel payments were to Dell's operations. By fiscal year 2007,
Intel's money accounted for 76 percent of Dell's operating budget.