FTC settles antitrust complaint against Intel

Proposed settlement prohibits the company from giving computer makers benefits for exclusive use of its chips

WASHINGTON -- Intel has reached a proposed settlement with the U.S. Federal Trade Commission in the agency's antitrust complaint, with Intel prohibited from giving computer makers benefits for exclusively using its chips.

The settlement, announced Wednesday, also prohibits Intel, the world's largest chip maker, from retaliating against computer makers if they do business with other suppliers.

In addition, the settlement also establishes a $10 million fund, to be established over a two-year period, for software vendors to recompile their products for better performance with competing chips. The FTC alleged that Intel's actions caused software compiled on an Intel compiler to run more slowly on other chipsets.

"This is an exceptionally important case, and the commission was deeply troubled by Intel's actions," said Jon Leibowitz, the FTC's chairman, in a conference call with media Wednesday. "We accepted this settlement because it helps consumers."

The settlement requires Intel to rework its intellectual property agreements with competitors Advanced Micro Devices, Nvidia and Via Technologies and give them more freedom to consider mergers or joint ventures with other companies without the threat of patent infringement.

Intel must also offer to extend Via's x86 licensing agreement for five years beyond the current agreement, which expires in 2013, and it must maintain the open standard PCI Express Bus interface in a way that will not limit the performance of graphics processing chips for six years, the FTC said.

The settlement will "open the door" to new competition, Leibowitz said.

Intel did not admit to any wrongdoing as part of the settlement. The agreement has been accepted by the FTC for public comment and is a public document. Before it becomes final the agreement will be subject of a public comment period that will last 30 days.

"This agreement provides a framework that will allow Intel to continue to compete and to provide customers with the best possible products at the best prices," the company said. "The settlement enables Intel to put an end to the expense and distraction of the FTC litigation."

The FTC filed its complaint against Intel in December, saying the company had abused its dominance in the chip market and carried out a "systemic campaign" of threats and rewards to coerce computer makers like IBM, Dell and Hewlett-Packard into using fewer chips from AMD and Via Technologies.

According to the FTC, the tactics were designed to "put the brakes on superior competitive products" that threatened Intel's monopoly. The complaint mentioned AMD's Opteron server processors, released in 2003, as an example. Intel's conduct, carried out over the past decade, resulted in higher prices and less choice for consumers, the FTC said.

It's the second time the FTC has settled an antitrust case against Intel. In 1998 it accused the chip maker of using its dominance to coerce other vendors into settling intellectual property disputes on terms favorable to Intel. Intel and the FTC settled that case in 1999, a day before it was due to go to trial.

The FTC's latest suit was filed a month after Intel agreed to pay $1.25 billion to settle antitrust complaints brought against it by AMD. The smaller chip maker had accused Intel of similar tactics to those in the FTC complaint, saying Intel provided rebates to PC makers if they agreed to forgo the use of AMD chips.

Intel admitted to no wrongdoing in that settlement. But it was also sued by the European Commission, which last May found Intel guilty of abusing its dominant position to shut smaller rivals out the market. It fined Intel $1.45 billion at the time, the biggest fine it had imposed in its history. Intel is appealing that decision.

Most of the previous cases dealt with CPUs only, but the FTC was also troubled by Intel's conduct in the graphics market. General purpose GPU chips from companies like Nvidia and AMD's ATI division are taking on CPU-like capabilities and are therefore another threat to Intel's dominance, the FTC said in its complaint.

It accused Intel of several illegal tactics to hamper the development of its rivals' GPUs, including denying interoperability with its own microprocessors, and selling its CPUs and GPUs bundled together at below cost.

Intel and Nvidia filed opposing lawsuits last year over the interoperability issue, and the case is scheduled for trial in September.

Intel has maintained a 75 to 85% share of the desktop and server CPU markets for the past decade, the FTC said, giving it monopoly power. Research firm IDC said Intel's share of the PC chip market in the first quarter this year was 81%, compared to 18.8% for AMD and 0.2% for Via.

Intel's share of the GPU market is more than 50%, the FTC said.

Copyright © 2010 IDG Communications, Inc.

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