Intel, FTC in talks to settle antitrust case

NEW YORK: Intel Corp and the Federal Trade Commission are in talks to settle an antitrust case against the chipmaker, a move that could make it more difficult for rivals to pursue damages.

In December, the FTC filed charges against Intel, seeking to end what it described as decades of illegal sales tactics that have hampered competitors and kept prices for computer chips artificially high.

This week, the FTC and Intel agreed to suspend administrative trial proceedings as they work on hashing out a settlement.

The FTC accused Intel of strong-arming computer makers into exclusive deals, manipulating technical data to make its chips look more powerful than those from competitors and blocking rivals from making its chips work with Intel’s.

Intel, which disclosed the settlement talks late Monday, has disputed the charges and said it has merely been offering discounts.

A settlement would be at least a partial victory for Intel, said Robert Lande, director of the American Antitrust Institute at the University of Baltimore.

If Intel loses in court, rival chipmakers such as nVidia Corp would be able to pursue damages without having to again prove the antitrust charges. By contrast, settlements often come without any admission of wrongdoing.

“Once you’ve lost the case in federal court you can’t deny the charges anymore,” Lande said. “The only question is, ‘Did you hurt our clients and by how much.’”

Although a settlement with the FTC would ease Intel’s legal troubles in the United States, the company still faces trouble abroad.

A harsh settlement against Intel could bolster the case for stronger measures in European and Asian courts, where Intel is fighting penalties for anticompetitive practices. Lighter terms could discourage plaintiffs outside the United States, Lande said.

A key question remains about whether the cases will affect computer prices. Intel says its sales strategies help keep chip prices low. The FTC argues that prices haven’t fallen as much as they could have.

Roger Kay, president of Endpoint Technologies Associates, said Intel’s practices could harm consumers by destroying competitors that have innovative technologies.

“Intel controls so many levers in the ecosphere that they can crush their competitors if they choose to,” Kay said.

Intel, which declined further comment, is the world’s No 1 maker of microprocessors, the “brains” of personal computers.

Whopper of a penalty

The FTC case is particularly important because the FTC has said it wants to change Intel’s behaviour, instead of merely issuing fines, as the European Union and South Korea have done. Last year, Intel paid a record US$1.45bil (RM5bil) fine to European regulators but the company is appealing.

Intel has said the FTC was seeking major changes to the way Intel sells chips.

The two sides had been deep in settlement talks before the FTC filed charges. But those talks broke down over what Intel’s general counsel, Doug Melamed, described at the time as “unprecedented remedies ... that would make it impossible for Intel to conduct business,” such as restrictions on how much Intel can charge for its chips.

Intel’s prices have been at the centre of complaints by AMD Inc, a rival whose lobbying of regulators led to charges against Intel around the world.

AMD has complained that Intel has paid computer makers to avoid using AMD chips.

AMD quoted a manager from Toshiba Corp comparing Intel’s payments for not using AMD’s chips to “cocaine.” In a 2005 lawsuit against Intel, AMD also quoted an executive from Gateway complaining that Intel’s threats of retaliation for working with AMD beat them “into guacamole.”

Intel said its payments to computer makers are simple volume discounts that help them pass on lower prices to consumers. Microprocessors can be 20% of a computer’s price.

AMD settled the lawsuit with Intel last year, with Intel agreeing to pay AMD US$1.25bil (RM4.3bil) and the companies entering into a new, five-year cross-licensing deal.

But the FTC later filed its own complaint.

The two sides have 30 days to reach an agreement. If not, the case will continue and go to trial before an administrative law judge in September.

The New York Attorney General’s office is also investigating Intel.

The FTC’s lawsuit contains the most wide-ranging allegations yet against Intel, the world’s largest chipmaker.

If the FTC wins, the case will have a broad impact because it affects two key markets dominated by Intel — central processing units used in personal computers and graphics chips. — AP

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