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FTC reaches antitrust deal with Intel

The Federal Trade Commission staff reaches a surprise agreement with Intel one day before the antitrust suit was to begin.

WASHINGTON--Lawyers for Intel and the Federal Trade Commission have reached a tentative agreement to settle the government's antitrust case against the world's largest computer chipmaker.

The company and the FTC's filed a joint motion to delay start of the antitrust trial so that commissioners can vote on an 11-hour settlement the two parties reached over the weekend. The trial, which was to start tomorrow, is stayed indefinitely while the agency's four active commissioners consider the proposed settlement, which litigators on both sides signed yesterday.

The commissioners are expected to vote on the agreement within a matter of days, according to an agency spokeswoman. If approved, the agreement will then be put up for public approval for 60 days.

The FTC has also been pursuing a larger investigation of Intel's business practices in other areas. That investigation was continuing, but the FTC seemed to indicate that it was trying to wrap up that case as well.

The commission sued Intel last June, alleging that the company was a monopolist that illegally threatened to stop dealing with customers unless they signed away valuable intellectual property rights. The commission sought an order that would have forbidden Intel from engaging in that practice.

Terms of the settlement remained confidential but FTC spokeswoman Victoria Streitfeld said it gives the government what they have been seeking all along. The FTC "sought out to establish a principle and the staff believes that the proposed settlement achieves that goal," Streitfeld said. Both sides indicated that the agreement resolved the case.

"If approved by the commission, the proposed settlement...would resolve the allegations contained in the commission's complaint," said William Baer, director of the FTC's bureau of competition. Baer added that the FTC is investigating remaining issues but said his staff "is committed to working expeditiously to resolve those concerns."

Intel chief executive Craig Barrett called the proposed deal a "win-win for both parties," saying that it "gives us value for our intellectual property rights."

Company spokesman Chuck Mulloy added that "Intel is pleased with the agreement and especially pleased to avoid a lengthy and expensive trial. We are pleased that issues associated with our intellectual property have been addressed."

Not all parties involved in the dispute were pleased, however. Intergraph, one of the companies central to the case, said it will continue to pursue its own legal action against Intel.

In a prepared statement, the computer maker said it hopes that the settlement will change Intel's behavior but said it will continue to pursue its own legal action against the chipmaker, which is pending in federal court in Alabama. If anything, the settlement vindicates the company's theories, Intergraph said.

"We hope that the settlement reached by the FTC and Intel will ensure that Intel changes its behavior to give fair and equal treatment to the companies they do business with, and not cut off those companies from vital product and information that they need in order to compete. We are also hopeful that the settlement will protect the interests of the industry and will ensure fair business practices by Intel in the future," the company said.

"We will continue to pursue our private lawsuit against Intel, which is a much broader case and includes antitrust violations, patent infringement, and illegal coercive behavior. While we have not seen the precise relief the FTC obtained in the decree, this settlement vindicates our antitrust claims and shows that the preliminary injunction in favor of Intergraph granted by Judge Nelson in the federal court of Alabama was based on sound antitrust principles," Intergraph said.

The FTC's complaint accuses Intel of violating antitrust laws when it withheld advanced product information and chip samples from three companies when they asserted intellectual property rights against the chipmaker. Intel does not deny taking action against Intergraph, Compaq Computer, and Digital Equipment (now owned by Compaq) but says it violated no laws in doing so.

Legal analysts said an FTC victory could have set new rules by making it harder for dominant firms to terminate customer relationships. Although Intel denied it holds monopoly power, it insisted that even monopolists have the right to control their patents, trade secrets, and other intellectual property. Intel maintained that fighting for the principle was crucial to its business.

Under commission rules, a proposed consent agreement accompanied by a motion to withdraw a matter from review brings all proceedings before the administrative law judge so that the commission can consider the settlement. During the review process, commission staff and representatives of Intel are free to meet with commissioners to discuss the matter.

The commission can then accept the proposed settlement, reject it and return the matter to litigation, or take such other action as it may deem appropriate. The FTC's rules require that the proposed consent agreement not be made public until it has been accepted by the commission.

Shares of Intel surged this morning on the news and closed the day five points higher, at 119.625. The stock has traded as high as 143.69 and as low as 65.66 during the past 52 weeks.

Compaq, for its part, said it was pleased with the outline of the settlement the parties have issued.

"As the world's largest supplier of PCs and computer systems, we are pleased that the Federal Trade Commission staff and Intel have reached a proposed settlement," said Thomas Siekman, general counsel for Compaq, in a prepared statment.

"We are confident that the interests of Compaq, Intel, the industry, and the government will be satisfied by the settlement," he said. "Working with Intel, we will continue to provide innovation to the PC marketplace and the best standards-based technology to customers."

A Compaq spokesman, however, added that the company has not reviewed the exact terms of the settlement.