Experts: 'Predatory pricing' for Intel's Atom legal

Computerworld - Intel Corp. may very well bundle its Atom CPU and graphics chipset to netbook PC makers for a lower price than Atom alone, as rival Nvidia Inc. CEO Jen-Hsun Huang charged last week.

Intel may even sell the bundle for less than the cost of making it, known as predatory pricing, in order to lock Nvidia and its Ion platform out of the netbook market.

And none of that violates U.S. antitrust law, a leading legal expert told Computerworld on Wednesday.

"Intel is not obligated to deal with a competitor at all," said Michael Cooper, a lawyer with the Washington D.C. office of the firm Bryan Cave and a former anti-trust prosecutor for the Department of Justice and the Federal Trade Commission. "It can set its own terms, even if it is the only one making the [Atom] chip."

Facing looming competition from Intel in the high-end graphics chip market, Nvidia is counterattacking in the netbook market with its Ion, which is considered more powerful than Intel's offering, the 945 Express (PDF document).

But uptake of Ion has been limited. Since its release earlier this year, only Lenovo Group Ltd. and Acer Inc. have announced plans to make Ion-powered netbooks and net-top PCs, respectively.

Moreover, Lenovo is charging buyers of the Ion-powered IdeaPad S12 netbook $50 more than the all-Intel version.

That, Huang implies, is because Intel is pricing its Atom CPU, presumably the N270, at $45, while bundling the CPU with its graphics chipset for $25.

"That seems pretty unfair," Huang told Reuters. "We ought to be able to compete and serve that market."

However, Cooper, says there is no law to preclude such pricing. "The law has evolved such that unless you have a history of dealing with a competitor in a certain way, even a monopolist is under no obligation to deal with a competitor in a particular way, especially if it would help the latter make a profit or do better than they would otherwise would."

"It's easy to look at things from a static standpoint and say, 'Geez, this company is being hurt because they have to pay more for that chip,'" he said. "[But that] may actually be beneficial for competition by spurring that firm to innovate."

Huang's complaint followed the European Commission fining Intel $1.44 billion for anti-competitive behavior against Advanced Micro Devices, including allegedly paying rebates to PC makers for buying most of their chips from Intel, not AMD, as well as selling server chips at below cost to large customers such as governments and universities.

Intel spokesman Bill Calder told Reuters: "We compete fairly. We do not force bundles on any computer makers and customers can purchase Atom individually or as part of the bundle ... If you want to purchase the chip set, obviously there is better pricing."