FTC sues Intel, aims to shape the GPU market

The Federal Trade Commission is suing Intel, alleging that the chip maker has "waged a systematic campaign to shut out rivals’ competing microchips."

Updated: The Federal Trade Commission said Wednesday that it is suing Intel, alleging that the chip maker has "waged a systematic campaign to shut out rivals’ competing microchips." In addition, the FTC is looking to shape the future of the graphics processor market by keeping Intel in check.

In the complaint the FTC argues that Intel (statement, PDF, Techmeme):

  • Cut off rivals' access to the marketplace;
  • Deprived consumers of choice and innovation;
  • Was anticompetitive for a decade as it moved to shore up its monopoly;
  • And now is working to choke off rivals in graphics chips.

The FTC alleges that:

Intel’s anticompetitive tactics were designed to put the brakes on superior competitive products that threatened its monopoly in the CPU microchip market. Over the last decade, this strategy has succeeded in maintaining the Intel monopoly at the expense of consumers, who have been denied access to potentially superior, non-Intel CPU chips and lower prices.

Sound familiar? It is. The FTC argument is very similar to the EU's case against Intel. The FTC alleges that Intel used threats and rewards against PC giants like Dell, HP and IBM to "coerce them not to buy rival computer CPU chips." In addition, restrictive dealing kept PC makers from marketing non-Intel machines.

Intel in a statement said the FTC filed its suit without proper investigation. In addition, the two sides were about to settle but the FTC wanted to pursue "unprecedented remedies." Intel said that the FTC is looking to regulate the chip industry rather than enforce existing laws. Intel added:

Intel has competed fairly and lawfully. Its actions have benefited consumers. The highly competitive microprocessor industry, of which Intel is a key part, has kept innovation robust and prices declining at a faster rate than any other industry. The FTC’s case is misguided. It is based largely on claims that the FTC added at the last minute and has not investigated. In addition, it is explicitly not based on existing law but is instead intended to make new rules for regulating business conduct. These new rules would harm consumers by reducing innovation and raising prices.

The scrum is all about the future of the chip industry---GPUs. The FTC is arguing that Intel is falling behind the competition from graphics processing units, or GPUs. GPUs are currently the turf of Nvidia and AMD, but Intel represents a future threat. The FTC appears to be trying to head Intel off at the GPU pass. And if you believe that GPUs are the future, the FTC is being way proactive here.

To wit:

Intel has responded to this competitive challenge by embarking on a similar anticompetitive strategy, which aims to preserve its CPU monopoly by smothering potential competition from GPU chips such as those made by Nvidia, the FTC complaint charges. As part of this latest campaign, Intel misled and deceived potential competitors in order to protect its monopoly. The complaint alleges that there also is a dangerous probability that Intel’s unfair methods of competition could allow it to extend its monopoly into the GPU chip markets.

As for the remedies, the FTC is "seeking an order which includes provisions that would prevent Intel from using threats, bundled prices, or other offers to encourage exclusive deals, hamper competition, or unfairly manipulate the prices of its CPU or GPU chips." The FTC may also prohibit Intel from excluding the sale of rival CPU or GPU chips.

Also: Intel to pay AMD $1.25 billion as companies end litigation war; Is it a new chip era?

Among the key excerpts from the complaint:

For discrete GPUs, Intel has created several interoperability problems, including reductions of speed and encryption, that have had the effect of degrading the industry standard interconnection with Intel’s CPUs. Some of this conduct appears to have been specifically targeted at crippling GP GPU computing functionality.

And.

Intel sells its Atom CPU bundled with a graphics chipset. Some OEMs purchased the bundle from Intel, discarded Intel’s inferior graphics chipset and chose instead to use Intel’s Atom CPU with the Nvidia graphics chipset. To combat this competition, Intel charged those OEMs significantly higher prices because they used a non-Intel graphics chipset or GPU. Intel would offer the bundled pricing only to OEMs that would then use the Intel chipset in the end-product and not use a competitive product.

And.

Intel’s efforts to deny interoperability between competitors’ (e.g., Nvidia, AMD, and Via) GPUs and Intel’s newest CPUs reflect a significant departure from Intel’s previous course of dealing. Intel allowed, and indeed encouraged, other companies including Nvidia to develop products that interoperated in a nondiscriminatory manner with Intel’s CPUs (and its chipsets and related connections) for the last ten years. The interoperability of these complementary products, along with the innovation and intellectual property contributions made by these companies to Intel in exchange for such interoperability, made Intel’s CPUs more attractive to OEMs and customers. Indeed, Intel used other companies’ technologies to enhance Intel’s graphics capabilities and its monopoly power in CPUs.

Intel’s conduct and representations created a duty to deal and cooperate with its competitors, such as Nvidia, AMD, and Via, to enhance competition and innovation for the benefit of consumers. These companies’ reliance on Intel’s original representations was reasonable.

Once Nvidia and other companies committed to working with Intel, and in some cases granted significant intellectual property to Intel, and were thus locked into Intel’s strategy, Intel changed its position with these companies and used its power to harm competition.

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