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FTC member knocks Intel settlement

One of the four commisioners who must approve the agency's proposed settlement spoke out against the deal, saying it will be hard to enforce.

One of the four Federal Trade Commission members who must approve the agency's proposed settlement of antitrust charges against Intel spoke out against the deal, saying it will be hard to enforce.

But the remaining FTC commissioners applauded the proposal, which was announced last month and settles charges that Intel used its dominance in the microchip industry to stifle competition. The majority's support means the deal is likely to be approved when commissioners vote on the deal, probably in early summer.

Commissioner Orson Swindle, who was the only commissioner to vote See related special coverage: Broader Intel case reportedly still
alive against suing Intel when the agency was considering the suit last year, said a "major proviso and some significant exceptions" in the settlement would not impose any significant restrictions on the world's largest chipmaker.

"I hope my pessimism is unwarranted, but the key terms of the order seem destined to enmesh the Commission in expensive, and perhaps intractable, enforcement proceedings if Intel is ever suspected of violating it," Swindle wrote in public comments.

Swindle for the first time publicly called into question the FTC's case. "I do not believe that the complaint spells out an especially coherent theory of how [Intel's business] dealings harmed consumers," he wrote.

The FTC claimed that Intel was a monopolist that harmed innovation. In patent disputes involving Intergraph, Digital Equipment and Compaq Computer, Intel threatened to withhold crucial product information and samples if the companies didn't license their technology to the chipmaker. The FTC claimed that the hardball tactics robbed potential competitors of their core bargaining power by eroding their intellectual property rights.

Under the proposed settlement, Intel agreed not to withdraw advanced products and information from any customer "for reasons related to an intellectual property dispute."

"It is extremely doubtful that Intel is going to create any kind of record that will enable the Commission to ascertain whether" a decision to withhold information is related to a patent dispute, Swindle wrote.

He added that another provision allowing Intel to sever ties with customers for "business considerations unrelated to the existence" of an intellectual property dispute would similarly make enforcement of the settlement "hinge on difficult inquiries into the state of mind of Intel decision makers."

Swindle also aired his views on the complaint his agency filed against Intel nearly a year ago, saying he doubted prosecutors ever could have won the case.

"My vote against pursuing the case last June, especially as regards Intel's conduct toward Digital and Compaq, rested in part on my sense that the Commission had not sufficiently considered the grounds on which even a putative monopolist is entitled to withhold aid and comfort from another company that threatens serious harm by suing it" or a close business partner, Swindle wrote.

In a separate comment, however, FTC chairman Robert Pitofsky and commissioners Sheila Anthony and Mozelle Thompson expressed support for the suit and the proposed settlement.

"These are allegations, not proven facts, and Intel would have had a full opportunity to respond to these allegations had there been a trial," the commissioners wrote. "But the allegations are consistent with our knowledge of the industry and with common sense, and the proposed remedy is consistent with both of those as well as with Intel's representations as to its own legitimate business needs."