(INTC) FTC targets Intel in antitrust probe
AMD ALSO RECEIVES SUBPEONA
By Steve Johnson
Mercury News
Article Launched: 06/06/2008 09:17:34 AM PDT
Intel disclosed Friday it is the target of a federal probe involving allegations it improperly discouraged PC makers from using chips sold by its bitter rival, Sunnyvale-based Advanced Micro Devices.
The Santa Clara company - also facing similar investigations in Europe, Asia and New York - said Friday it received a subpoena from the Federal Trade Commission on Wednesday "related to Intel's business practices with respect to competition in the microprocessor market."
The FTC confirmed it is looking into the activities of Intel, the world's biggest chip maker. But it declined to provide other information about its probe.
"We can acknowledge the existence of the investigation, but that's all we can say at this point," said FTC spokesman Mitch Katz.
In a written statement, Intel said it has been working with the FTC since 2006 "on an informal inquiry into competition in the microprocessor market and has provided the commission staff with a considerable amount of information and thousands of documents."
The company, which reported a profit last year of nearly $7 billion, said it would cooperate with the federal investigation and emphasized it "believes its business practices are well within U.S. law." As evidence that the computer chip market is "fiercely competitive," the statement said microprocessor prices declined by 42.4 percent from 2000 to the end of 2007.
Several experts noted that by opening a formal investigation, the FTC will be able to get access to documents in AMD's three-year-old lawsuits against Intel, which until now have been kept confidential under a federal court's protective order.
Some of those documents will show Intel did nothing wrong, said Intel spokesman Tom Beermann.
"The commission will now have a more full and complete picture of Intel's business practices, which we believe are lawful," he said.
Executives at AMD - which lost more than $3 billion last year - said they also had received an FTC subpoena on Wednesday, seeking documents related to their claim that Intel had used its dominance in the semiconductor industry to persuade computer makers not to use AMD's chips.
"Intel must now answer to the Federal Trade Commission, which is the appropriate way to determine the impact of Intel practices on U.S. consumers and technology businesses," AMD said in its own statement. "In every country around the world where Intel's business practices have been investigated . . . antitrust regulators have taken action."
By launching an investigation, the FTC may have wanted to show that it "is not lagging behind authorities around the world in taking these issues seriously," added Thomas McCoy, AMD's executive vice president for legal affairs and its chief administrative officer.
If Intel is found to have violated the law, it could massive fines and be forced to change the way it sells its chips.
Intel's stock price dropped 97 cents or about 4 percent to $22.90 at the close of trading Friday. AMD's shares fell 35 cents or about 4.5 percent to $7.43.
Intel has been under increasing fire over its business practices.
On Wednesday, South Korean authorities fined the company about $25 million, claiming it deterred competition by offering illegal discounts to South Korean computer makers, such as Samsung Electronics, so they wouldn't buy chips from AMD. Intel's General Counsel Bruce Sewell has said the company probably will appeal that ruling.
In February, European Union regulators raided Intel's offices and computer retailers seeking evidence to bolster their previous charges that Intel engaged in below-cost pricing and other practices to discourage computer makers from using AMD chips.
And in January, New York Attorney General Andrew Cuomo began his own formal probe of Intel, accusing the company of "potential anti-competitive conduct."
The Japanese Fair Trade Commission also has contended that Intel offered inappropriate rebates to computer makers. Intel settled those claims in 2005, while disagreeing with the findings.
Having the FTC conduct its own investigation "is a very important and significant development," said Edward Black, chief executive of the Computer and Communications Industry Association, which has AMD as a member, but not Intel.
Noting that Intel controls at least 80 percent of the computer-chip market, he said it's essential that competition be allowed to thrive in the industry to encourage technological innovation. As a result, Black added, "we think this is a positive development.
But some other experts cautioned that just because the FTC is investigating doesn't mean it will conclude there is any basis to take punitive action against Intel. They also pointed out that the federal inquiry could take years, just like the trial involving AMD's suit against Intel. On Thursday, that trial was postponed until February 2010 because the two sides were still exchanging relevant documents.
"All they are doing is asking questions," said John Peirce, an Washington D.C. antitrust specialist with the law firm Bryan Cave, commenting on the FTC investigation. "It's a small battle in a big war."
Doug Freedman, an analyst with investment firm American Technology Research, agreed.
"There clearly is no immediate impact" of the FTC investigation on either Intel or AMD, he said. "These things take forever."
AI
News 
Market Data 
Discover 
