Intel Can’t Choke Off Competition

Aug 4th, 2010 | By businessnews | Category: Business


August 04, 2010, 12:44 PM EDT




By Jeff Bliss and Ian King


(Updates with analyst comment in fifth paragraph and AMD and Nvidia comments in seventh and eighth paragraphs.)

Aug. 4 (Bloomberg) — Intel Corp., the world’s largest computer chipmaker, cannot use threats, retaliation or exclusive deals to block customers from buying competitors’ products under a settlement of antitrust charges, the U.S. Federal Trade Commission said.

The settlement covers graphics chips, central processors and chipsets, the FTC said.

“This case demonstrates that the FTC is willing to challenge anticompetitive conduct by even the most powerful companies in the fastest-moving industries,” FTC Chairman Jon Leibowitz said in a statement today.

Santa Clara, California-based Intel has modified some of its business practices in recent years following pressure from rivals and antitrust authorities, analysts said. The settlement puts in writing some of these changes and won’t require Intel to overhaul its business policies, said Patrick Wang, an analyst at Wedbush Securities Inc. in New York.

Today’s settlement announcement “is a lot of fanfare for a formality,” said Wang, who has an outperform rating on Intel shares. “The competitive landscape does not change after this.”

Intel’s rivals said they supported the settlement’s terms.

“The FTC has acted firmly in the interest of American consumers to safeguard the competitive process in the critically important microprocessor and graphics markets,” said Advanced Micro Devices Inc., Intel’s closest competitor, in a statement.

‘More Competitive’

The agreement will lead to “a more competitive environment for our industry,” said Hector Martinez, a spokesman for Santa Clara, California-based Nvidia Corp., the world’s second-largest maker of computer-graphics chips, in a statement.

Under the settlement, Intel agreed not to give computer makers any “benefits” in exchange for promises they will buy chips exclusively from Intel, the FTC said. The company can’t withhold these benefits from customers that also buy from Intel’s competitors, the agency said.

The settlement will require Intel to change agreements with AMD, Nvidia and Via Technologies Inc. in Taiwan so the chipmakers can enter into mergers and joint ventures with other companies without fearing a patent-infringement lawsuit from Intel.

The FTC lacks the power to fine Intel unless the company violates the settlement.

Exclusive Deals

The agency sued in December, accusing Intel of illegally using its dominance for a decade to block customers from buying competitors’ products. The agency said Intel forced computer makers into exclusive deals and blocked rivals from making their chips work with Intel’s.

An Intel official said in a statement today that the chipmaker hasn’t admitted any violation of the law or accepted the facts alleged by the complaint.

“This agreement provides a framework that will allow us to continue to compete and to provide our customers the best possible products and the best price,” said Doug Melamed, Intel’s general counsel, in the statement. It “enables us to put an end to the expense and distraction of the FTC litigation.”

Intel accounts for more than 80 percent of global computer- chip sales, dwarfing AMD. Intel agreed to pay AMD $1.25 billion in November to settle a lawsuit by the Sunnyvale, California- based company.

In May 2009, Intel was fined 1.06 billion euros, or $1.45 billion at the time, by the European Union. In addition to the penalty, a record amount for the EU, Intel was ordered to stop using illegal rebates to thwart competitors.

The FTC commissioners approved the proposed settlement 4-0. Commissioner William Kovacic was recused. The public will have 30 days to comment on the settlement and then the commissioners will vote on whether to make it final.

–Editors: Laurie Asseo, Don Frederick

To contact the reporters on this story: Jeff Bliss in Washington jbliss@bloomberg.net; Ian King in San Francisco at ianking@bloomberg.net.

To contact the editor responsible for this story: Mark Silva in Washington at msilva34@bloomberg.net



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