Industry observers are split over whether the increasingly aggressive antitrust stance taken by U.S. regulators is a good or bad thing for the IT industry.
Officials with the Federal Trade Commission say the agreement
the FTC reached with Intel
to settle antitrust allegations will create a
more competitive playing field that will benefit vendors, OEMs and customers
The settlement, announced Aug. 4, heated up the simmering
debate about the degree to which the government should intervene in the IT
market, and whether that intervention helps or hurts those involved, from
vendors to consumers.
Intel was accused of using conditional financial payments and
coercion to force OEMs to limit their use of products from Advanced Micro
Devices and graphics chips maker Nvidia. The FTC also said Intel altered some
of its technologies, such as compilers, so that they would hinder the
performance of AMD products, and then laid
the blame for the poor performance on AMD's
The settlement set out a broad set of restrictions on Intel
business practices. For its part, Intel has denied any wrongdoing in this and
other legal cases.
The agreement comes at a time when regulators in both the United
States and Europe are
taking a hard look at antitrust issues in the IT space. IBM
is getting attention both here and abroad over its System
z mainframe business,
while Google also has had its
of questions being raised. Even Intel, while putting the FTC case
aside, faces a lawsuit filed by the N.Y. State Attorney General's Office, and is
with the European Commission,
the antitrust arm of the European Union, over
a $1.45 billion fine levied in 2009.
Advocacy groups like the CCIA (Computer and Communications
Industry Association) have cheered government agencies that have taken on some
of the larger companies-including IBM and
Intel-that the organization believes are unfairly stifling competition through
their market dominance.
CCIA President and CEO Ed
Black, in response to the FTC's announcement of the settlement, said it was
time for regulators to get control of the situation.
"CCIA has long urged the FTC to act because of the
importance of this market to the whole high-tech industry, its impact on
consumers and innovation, and the particularly egregious nature of Intel's
actions," Black said in a statement. "Initial indications are that
the commission's settlement reflects a deeper and broader understanding of the
markets involved than any past rulings against Intel. The forward-looking
nature of the settlement is vital to restore competition to a part of the
high-tech ecosystem that has been severely harmed."
That harm came in the form of slowed innovation, a lack of
choices for consumers and prices that-while falling-were not falling as fast as
they could have with an even playing field, according to FTC Chairman Jon
Others view the aggressive approach taken by the FTC and other
regulatory bodies as harmful to one of the few remaining industries that the United
States has an advantage in. Rather than
protecting consumers, regulators are acting on the complaints of competitors,
Evan Stewart, an antitrust expert and partner with the law firm Zuckerman
Spaeder in New York, said in an
interview with eWEEK.
"This is a disturbing trend," Stewart said. "The
antitrust [groups] are not keeping an eye on what's best for the customer. Is
Intel developing superior products that are serving the consumers? I think the
answer is yes."
The FTC should worry less about what the company's competitors
are saying and more about whether consumers are benefiting, he said.
"Competitors always whine," Stewart said.
The real test of this agreement will be three to four years
down the road, when it can be better determined whether Intel and consumers
were harmed by the settlement, he said. In similar situations in the
past-including when the Department of Justice took on Microsoft and other
regulatory agencies went after IBM-the
result was harm done to both the tech company in question and the IT market in
which it operated.
The IT industry should expect a continuation of this aggressive
regulatory approach, Stewart said, noting a comment in 2009 by Christine
Varney, an assistant attorney general and top antitrust official at the
Department of Justice, who said loose antitrust rules under the Bush
administration were contributors to the current global economic woes. She
promised greater oversight by the Obama administration.
"She is a person of her word," Stewart said.
"And this [IT industry] is where the action is."
It's also an unfortunate intersection of an industry in which
the United States
has a competitive edge over the rest of the world, and one that the government
knows the least about, he said.
"Some damage is going to be done [by the
settlement]," Stewart said. "You just hope it's not too bad."
Hans Mosesmann, an analyst with Raymond James Equity Research,
said in a research note Aug. 4 that the impact of the settlement could be
minimal because the restrictions outlined in the agreement are similar to ones
Intel already is operating under, thanks to its agreement with AMD
in December that settled their private legal disputes. The only difference now
is that those protections are extended to Nvidia and Via Technologies.
Other restrictions already were included in licensing
agreements with Intel competitors.
"What is interesting is that a governing body in the U.S.
has joined other countries (Korea,
Japan and the
EU, for example) in pinning Intel as the bully," Mosesmann wrote in his
note. "The message is that Intel should be more constrained in its
dealings with OEMs, ODMs (original design manufacturers), the channel and its
competitors. We are watching you."