FTC opens antitrust probe of Intel

The chip maker said it is cooperating with the agency

The Federal Trade Commission (FTC) has opened an antitrust investigation into chip maker Intel Corp., the agency and Intel both said Friday.

Intel said the FTC served a subpoena to the company on Wednesday. The company will work cooperatively with the FTC to provide information, as it has since 2006, when the FTC began an informal inquiry, Intel said in a statement.

"The company believes its business practices are well within U.S. law," Intel said. "The evidence that this industry is fiercely competitive and working is compelling."

Prices for microprocessors declined by more than 42% between 2000 and 2007, Intel noted.

An FTC spokesman said he could confirm the investigation but couldn't give more details.

The FTC investigation comes a day after the Korea Fair Trade Commission fined Intel a reported $25.42 million for abusing its dominant position in the microprocessor market. Intel offered rebates to South Korean computer makers in a way that unfairly harmed its rival Advanced Micro Devices Inc. (AMD), the Korean agency said.

In January, New York state Attorney General Andrew Cuomo launched an antitrust investigation of Intel.

Japan and the European Commission have also investigated Intel, and AMD has a pending civil lawsuit against the company.

The Fair Trade Commission of Japan (JFTC) in 2005 recommended that Intel end its practice of offering funds to PC makers in exchange for a commitment not to use processors from its competitors. Intel accepted those recommendations, which came after a lengthy JFTC investigation, saying at the time it wanted to avoid a protracted legal battle.

The FTC investigation won't be a crippling blow for Intel, according to Charles King, an analyst at Pund-IT Inc. But it could start to weigh the company down.

"Antitrust investigations tend to move very, very slowly," said King. "Where it becomes problematic is that [Intel has] a massive suit going on with AMD, they're dealing with an antitrust investigation in Europe, they just got whacked with a fine from South Korea and now the U.S. is investigating. It's expensive and tough to deal with, and it tends to be distracting when you're fighting allegations in multiple markets."

Dan Olds, founder of the Gabriel Consulting Group Inc., added that only Intel's lawyers will benefit from the multiple investigations.

"The worst thing about this is what it makes you do as a company," said Olds. "You have to document everything, have to keep records on everything, worry about everything you say and do. When you're under FTC investigation, your company is an open book. The Feds can go back years to harvest e-mails, customer communications, sales quotes and cash payments."

Olds also noted that this kind of effort tends to slow a company down and make it less aggressive in the market because it's so distracted on the legal side.

On a related note, AMD in a statement said it had received a subpoena from the FTC regarding the Intel investigation.

"Intel must now answer to the Federal Trade Commission, which is the appropriate way to determine the impact of Intel practices on U.S. consumers and technology businesses," said AMD executive vice president and chief administrative officer Tom McCoy. "In every country around the world where Intel's business practices have been investigated, including the decision by South Korea this week, antitrust regulators have taken action."

The Computer & Communications Industry Association (CCIA), a trade group with AMD as a member, praised the FTC decision to open the investigation.

The probe is "long due," said Ed Black, CCIA's president and CEO. After investigations by South Korea, Japan, and the European Commission, it was time for the U.S. government to act, he said.

Intel has a strong set of products and "should not have to abuse their power and break the law in order to be successful," he said.

Computerworld's Sharon Gaudin contributed to this report.

Copyright © 2008 IDG Communications, Inc.

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