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FAQ: FTC's lawsuit against Intel

By Jared Newman
December 17, 2009 09:52 AM ET

PC World - The Federal Trade Commission filed an antitrust-related lawsuit against Intel Wednesday, accusing the chip maker of deliberately attempting hurt its competition and ultimately consumers. The landmark lawsuit alleges that Intel has deprived customers of choice by trying to slow down innovation among its rivals, and by keeping computer makers hooked with lucrative incentives for doing little business elsewhere.

To get a better handle on what's at stake for consumers, we've asked a number of semiconductor experts to forecast what the impact will be on the computer-buying public.

Why is the FTC going after Intel now?

Intel's allegedly anticompetitive practices have been in the news quite a bit lately, with "smoking gun" e-mails revealed in Europe's antitrust lawsuit against Intel, the chip-maker's settlement with underdog AMD, and New York Attorney General Andrew Cuomo's antitrust lawsuit against Intel. Dan Olds, principal analyst for the Gabriel Consulting Group, says that, against this background, it didn't look good for the FTC to sit on the sidelines, and that the commission will likely seek a fine from Intel. Jim McGregor, In-Stat's chief technology strategist, also called the lawsuit a publicity move by the government.

Have consumers been paying too much for processors?

If the FTC's allegations are true, consumers actually have not been paying too much for their PCs, according to experts. Because Intel has been allegedly attempting to undercut the competition, the price of Intel PCs may have been artificially lowered.

This isn't about pricing for consumers, says Leslie Fiering, Gartner's research vice president. At issue is whether it's illegal to provide discounts and other incentives in exchange for a certain amount of business. So you could argue that Intel's practices saved end-user customers money by charging manufacturers less. Those savings were theoretically passed on to consumers.

From a macro perspective, you could argue that in the long run, Intel's alleged anticompetitive behavior could stifle the competition (AMD) and thereby allow Intel to own the PC semiconductor market and start charging much higher prices. But that scenario has not played out yet, say experts.

So what have consumers lost, superior products?

Experts say yes. In one scenario, Intel may have charged manufacturers less money for its Atom chipset with integrated graphics versus just the Atom processor alone. Integrated graphics is widely considered inferior to having a system with a dedicated video card or processors. As a result of muscling netbook makers to use Intel's integrated Atom chipset, instead of a stand-alone graphics processor, it locked out non-Intel chipmakers from netbooks.

One of those possibly hurt is nVidia with its Ion graphics mobile chip. We won't know for sure until details emerge, but nVidia may possibly have been locked out of netbooks whose manufacturers stuck millions of mininotebooks with the Atom's integrated graphics, which can't deliver high-quality video and is not adequate for graphics-heavy games.

Originally published on www.pcworld.com. Click here to read the original story.
Reprinted with permission from PCWorld.com. Story copyright 2012 PC World Communications. All rights reserved.
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