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FTC to add new evidence to Intel case

Next month the government will introduce evidence from Micron and SGI and allege harm in the chipset and motherboard markets.

3 min read
The Federal Trade Commission will introduce allegations at next month's trial with Intel that go beyond those made in a complaint filed last summer, a brief filed in the antitrust action suggests.

The new allegations stem from recently unearthed evidence that Intel allegedly threatened computer makers Micron Electronics and Silicon Graphics. Additionally, a government economist is likely to allege that Intel's conduct harms the markets for chipsets and "motherboards"--not just the market for microprocessors.

In recent briefs filed under seal in the case, Intel accused the FTC of having "shifted gears" and reneging on an agreement to limit evidence to alleged anticompetitive acts within the microprocessor market. It asked James Timony, the administrative law judge presiding over the case, to exclude evidence relating to the new allegations from trial, set to start March 9. In a ruling issued last Friday, Timony denied the Intel request and stated in a ruling issued yesterday that the FTC's "theory of the case has not fundamentally changed."

Details about the threats Intel allegedly made to Micron and SGI were unavailable. It remains to be seen how the FTC would use the evidence, or whether the allegations ultimately will be admitted into evidence. Timony's order only shows that Intel fought to exclude the evidence and that the FTC opposed the request. Both Intel and the FTC declined to comment for this story.

In a complaint filed last June, the FTC focused on Intel's relationship with computer makers Intergraph, Digital Equipment, and Compaq, alleging that the Santa Clara, California, company threatened to withhold crucial technical information from the companies unless they licensed their intellectual property in ways that benefited Intel. The behavior harmed competition among firms developing "microprocessor-related technologies," the FTC alleged.

In denying the motion to exclude, Timony indicated that an FTC expert witness intended to allege that Intel's conduct has harmed competition in the complementary markets for chipsets and motherboards. A chipset allows a microprocessor to interact with other parts of a computer. A motherboard is a collection of semiconductors that controls memory, chipsets, and other computer functions.

"The possibility of obtaining state-of-the-art chipsets and motherboards has become increasingly constrained as Intel has expanded to produce roughly three-fourths of new-generation personal computer chipsets," FTC witness Frederic M. Scherer wrote in an expert report still under seal. "And even under the most favorable circumstances, a computer assembler forced to rely upon third parties for chipsets or motherboards forfeits the opportunity to be a technological innovator with respect to the core of its product design."

Timony said that Scherer's analysis of adjacent markets was in line with typical evaluations made in monopoly cases, in which a defendant's market position, the structure of the industry, the effect of the alleged conduct on competition are all taken into account.

"Dr. Scherer's reference to licensing practices and marketing policies involving chipsets, motherboards, graphics controllers and CPU buses generally describes the context in which the alleged exclusionary conduct occurred," Timony wrote.

Timony also denied Intel's request to exclude other evidence, noting that FTC "counsel assert they only recently discovered Intel documents indicating Intel's threats to Micron Electronics and Silicon Graphics. Intel has the opportunity to take discovery relating to that conduct."

As previously reported, former Micron Electronics chief operating officer Dean A. Klein is tentatively scheduled to testify against Intel in the case.

In addition to requesting that evidence relating to the new allegations be excluded, Intel recently moved to disqualify the FTC's top litigator, who has close ties to Advanced Micro Devices, another company testifying for the FTC. Since deputy director Richard Parker was assigned to the case, Intel alleged, the agency "has recently shifted gears in an effort to adopt a theory advocated by" AMD. (See related story) Timony denied that Intel motion as well.