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FTC settlement focuses on keeping Intel honest

The commission's settlement aims to restrict aggressive and potentially anticompetitive business practices, and it leaves room for it to challenge the chipmaker's future alleged practices.

The Federal Trade Commission settlement with Intel on Wednesday focused on the chipmaker's exclusionary business practices while also trying to ensure vigorous competition in the graphics chip business.

Jon Leibowitz, the chairman of the Federal Trade Commission, speaking Wednesday morning about the Intel ruling.
Jon Leibowitz, the chairman of the Federal Trade Commission, speaking Wednesday morning about the Intel ruling.

Citing "Intel's disturbing behavior," the tone of the FTC's allegations in Tuesday's decision weren't very different from the language used in the lawsuit brought by Advanced Micro Devices against Intel in 2005. And many of the restrictions placed on Intel's business practices are similar to those reached with AMD in a $1.25 billion settlement in November.

What is different, however, is that the FTC decision has the weight of the federal government behind it. Moreover, the commission can challenge any harmful anitcompetitive practice Intel may engage in the future, even if not specifically prohibited by the proposed consent order, the FTC said Wednesday.

The FTC order is big on keeping Intel honest. Under the settlement, Intel will be prohibited from cutting deals with customers that prevents them from buying chips from rivals such as AMD. And Intel will be prevented from retaliating--as has been alleged most recently by the Securities and Exchanged Commission--against customers for straying from the Intel fold and doing business with non-Intel suppliers.

"Evidence shows that Intel refused to sell chips to some buyers, unless they agreed to limit, or in a few cases, entirely stopped buying chips from the company's competitor," Jon Leibowitz, FTC chairman, said in his opening remarks at Wednesday's press conference.

And AMD was quick to chime in. "In our settlement with Intel, AMD's critical remaining concern was Intel's use of all-or-nothing discounts to deny competitors' access to the marketplace. The FTC's order clearly and firmly prohibits such abuse and guarantees ongoing monitoring of Intel's conduct," AMD said in a statement Wednesday.

Underlying all of this is whether consumers were harmed by Intel's business practices, as also alleged by the European Commission when it levied a $1.45 billion fine on Intel in May of last year. The ultimate harm, however, is not only difficult to pinpoint but also not necessarily remedied by government agencies, according to one expert.

"We cannot simply assume that the settlement equates to a victory for consumers," Joshua Wright, an assistant professor of law at George Mason University Law School in Arlington, Va., wrote in a blog post after Wednesday's decision. U.S. government agency settlements are not always that "meaningful, from a consumer welfare perspective," according to Wright, who also served as a scholar in residence at the FTC.

Wright sees other potential problems. "This settlement has the FTC getting itself involved in Intel's business arrangements, competitive strategy, and even product design at a remarkably deep level," he said, expressing concern about government micromanagement of Intel business practices.

Keeping graphics competition vigorous
Looking beyond the longstanding issues centered on central processing units, or CPUs, the FTC also addressed the graphics chip market, as expected.

To date, the antitrust actions against Intel have focused on the sales practices for CPUs, an area where Intel and Advanced Micro Devices have been skirmishing for decades. However, the Federal Trade Commission, in effect, inserted itself into the legal wrangling between Intel and graphics chip supplier Nvidia, when it alleged in its December complaint that Intel was engaged in anticompetitive practices in the graphics chip market.

On Wednesday, the FTC said Intel must maintain a key interface, known as the PCI Express Bus, for at least six years "in a way that will not limit the performance of graphics-processing chips." The FTC hopes to provide a path for Nvidia and others to offer "complementary, and potentially competitive, products" to Intel's CPUs.

Intel is now moving its own graphics onto the CPU so competitors such as Nvidia and AMD would have to offer "discrete," or separate, graphics chips that attach to Intel CPUs. AMD is in a unique position, in that it can offer Intel-compatible CPUs and its own GPUs together; Nvidia does not make Intel-compatible CPUs.

"Nvidia supports the FTC's action to address Intel's continuing global anticompetitive conduct. Any steps that lead a more competitive environment for our industry are good for the consumer. We look forward to Intel's actions being examined further by the Delaware courts later this year, when our lawsuit against the company is heard," Nvidia said Wednesday.