No fast resolution seen for FTC's antitrust probe of Intel

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Intel antitrust case

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Computerworld - The antitrust investigation of Intel Corp. begun by the Federal Trade Commission last week is unlikely to be resolved before the next administration takes office in Washington, an antitrust legal group predicted today.

Indeed, the antitrust cases facing Intel in the U.S. and overseas could follow a long, multiyear path of "litigating to the eyeballs and extending it and extending it," said Robert Lande, a professor of law at the University of Baltimore and secretary of the American Antitrust Institute (AAI) in Washington.

The AAI, a nonprofit think tank that advocates more aggressive enforcement of antitrust laws, had urged the FTC to open a formal probe of Intel's business practices, expanding on an informal inquiry that the commission began two years. The FTC finally took that step on June 4, issuing a subpoena to Intel that lets it obtain information from the chip maker as well as other parties.

The AAI applauded the FTC's action in a statement issued last Friday. And during a conference call today, Lande and Albert Foer, the AAI's president, both contended that the new investigation is of particular importance because competition in the x86 microprocessor market is unlikely to extend beyond Intel and Advanced Micro Devices Inc.

Lande said the cost of developing processors makes it unlikely that new vendors will emerge to compete against Intel and AMD. But the bigger barrier to market entry may be the patents held by both companies on key chip technologies, he added.

"You have two firms bashing each other's brains in, and that's wonderful for competition," Lande said. But AMD has been struggling because of delayed product releases and competitive pressure from Intel. "What happens if AMD gets frozen out of this market?" Lande asked.

He answered his own question by saying that if Intel were to end up alone in the x86 market, it would become a monopolist. "And what do monopolists do? They raise prices, they get fat, they get lazy."

The current situation, with Intel and AMD sharing control of the market as a duopoly, already "is not a very favorable market structure," Foer said.

Intel has consistently defended its business practices. In response to the FTC's decision to begin a formal investigation, the chip maker said on Friday that it thinks its practices "are well within U.S. law." Intel added that there is "compelling" evidence that the processor market is "fiercely competitive" — for instance, the company said that prices fell 42.4% from 2000 through the end of last year.

But Intel has been dogged by antitrust litigation and investigations in recent years. AMD filed a lawsuit against Intel in federal court in Delaware in 2005. A trial isn't expected until 2010, and many of the court documents that might shed light on the issues in the case have been filed under seal. The most recent exchanges between the two companies, filed this month, concerned the availability of documents being sought during the discovery process.

The FTC's investigation of Intel is just one of several ongoing probes of the chip maker by government regulators. The most recent action of note was a decision by the Korea Fair Trade Commission to fine Intel $25.4 million for violating South Korea's fair trade rules. Intel said it plans to appeal the ruling, which also was announced last week.

The company also faces an active investigation by the European Commission. And at the state level, New York's attorney general began an antitrust probe of Intel last January.

In addition, the Japan Fair Trade Commission in 2005 recommended that Intel end its practice of offering money to PC makers in exchange for a commitment not to use processors from AMD and other rivals. Intel accepted the recommendations, saying at the time it wanted to avoid a protracted legal battle.

Grant Gross of the IDG News Service contributed to this story.

Read more about processors in Computerworld's Processors Knowledge Center.