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FTC – ANALYSIS OF PROPOSED CONSENT ORDER TO AID PUBLIC COMMENT

Tuesday, November 2nd, 2010

In order to aid public comment on the proposed settlement between Intel and the FTC, the FTC produced a written analysis:

The Federal Trade Commission (“Commission” or “FTC”) accepted for public comment an Agreement Containing Consent Order (“Proposed Consent Order”) with Intel Corporation (“Intel”) to resolve an Administrative Complaint issued by the Commission on December 16, 2009.1 The Complaint alleged that Intel unlawfully maintained its monopoly in the relevant CPU markets, and sought to acquire a second monopoly in the relevant graphics markets, using a variety of unfair methods of competition. Consumers were harmed by Intel’s conduct, which resulted in higher prices, less innovation, and less consumer choice in the relevant markets. Consumers were also harmed by Intel’s deceptive disclosures related to its compilers, which violated both competition and consumer protection principles. The Proposed Consent Order will bring immediate relief in the relevant markets and puts Intel under Commission Order.

As described in detail below, the Proposed Consent Order has two fundamental goals. First, it seeks to undo the effects of Intel’s past restraints on competition by enhancing the ability of AMD, NVIDIA, Via, and others to compete effectively with Intel. To that end, the Proposed Consent Order seeks: 1) to make it easier for AMD, NVIDIA, and Via to use third-party foundries to manufacture products (to enable them to better match Intel’s manufacturing advantages) (Section III.A.); 2) to give AMD, NVIDIA, and Via flexibility to secure modifications of change of control provisions in their Licensing Agreements with Intel (Section III.B); 3) to extend Via’s intellectual property license (Section III.C); and 4) to provide assurances to manufacturers of complementary and peripheral products that they will be able to connect their devices to Intel’s CPUs (Section II). These provisions compel Intel to make certain offers; they do not compel a third party to accept them. The goal is to require Intel to open the door to renewed competition, not to force a third party to take any particular action.

Second, the Proposed Consent Order is designed to protect the ability of customers and existing and future Intel competitors to engage in mutually beneficial trade, while prohibiting Intel from using certain practices to deter or thwart such trade. The Proposed Consent Order therefore prohibits Intel from engaging in: 1) certain pricing practices that could allow Intel to exclude competitors while maintaining high prices to consumers (Section IV.A.); 2) predatory design that disadvantages competing products without providing a performance benefit to the Intel product (Section V); and 3) deception related to its product road maps, its compilers, and product benchmarking (Sections VI, VII, and VIII).

FTC Analysis of Proposed Consent Order to Aid Public Comment (PDF)

Posted in CPU Market Competition, Discounting and Rebates, FTC Case Against Intel, FTC Section 5, GPU Market Competition, Innovation and IP, Intel, Legal Filing, Netbook Market, US FTC | No Comments »

Final Modified Settlement Agreement Between FTC and Intel – Decision and Order

Friday, October 29th, 2010

On October 29, 2010, the Federal Trade Commission (FTC) gave final approval to the settlement between Intel and FTC announced on August 4th of 2010.  The full agreement in PDF format can be downloaded below.

The Federal Trade Commission (“Commission”) having heretofore issued its complaint charging the Respondent Intel Corporation with violations of Section 5 of the Federal Trade Commission Act, as amended, 15 U.S.C. § 45, and the Respondent having been served with a copy of that complaint, together with a notice of contemplated relief and having filed its answer denying said charges; and

The Respondent, its attorneys, and counsel for the Commission having thereafter executed an agreement containing a consent Order, an admission by Respondent of all the jurisdictional facts set forth in the complaint, a statement that the signing of said agreement is for settlement purposes only and does not constitute an admission by Respondent that the law has been violated as alleged in such complaint, or that the facts as alleged in such complaint, other than jurisdictional facts, are true and waivers and other provisions as required by the Commission’s Rules; and

The Secretary of the Commission having thereafter withdrawn this matter from adjudication in accordance with § 3.25(c) of its Rules; and

The Commission having considered the matter and having thereupon accepted the executed consent agreement and placed such agreement on the public record for a period of thirty (30) days, and having duly considered the comments filed thereafter by interested persons pursuant to § 3.25(f) of its Rules, and having modified the Decision and Order in certain respects, now in further conformity with the procedure prescribed in § 3.25(f) of its Rules, the Commission hereby makes the following jurisdictional findings and enters the following Order:

1. Respondent Intel Corporation is a corporation organized, existing and doing business under and by virtue of the laws of the State of Delaware with its office and principal place of business located at Mission College Boulevard, Santa Clara, California 95054.

12. The Federal Trade Commission has jurisdiction of the subject matter of this proceeding and of the Respondent, and the proceeding is in the public interest.

Docket_No_9341_Intel_Modified_Decision_and_Order

Posted in CPU Market Competition, Compiler Design, FTC Case Against Intel, FTC Section 5, GPU Market Competition, Innovation and IP, Intel, Legal Filing, US FTC, Uncategorized | No Comments »

FTC Proposed Decision and Order in Settlement with Intel

Wednesday, August 4th, 2010

The final decision and order outlines the conduct restrictions that Intel and FTC agreed upon in August 2010.  These prohibitions and requirements include:

Under the settlement, Intel will be prohibited from:

  • conditioning benefits to computer makers in exchange for their promise to buy chips from Intel exclusively or to refuse to buy chips from others; and
  • retaliating against computer makers if they do business with non-Intel suppliers by withholding benefits from them.

In addition, the FTC settlement order will require Intel to:

  • modify its intellectual property agreements with AMD, Nvidia, and Via so that those companies have more freedom to consider mergers or joint ventures with other companies, without the threat of being sued by Intel for patent infringement;
  • offer to extend Via’s x86 licensing agreement for five years beyond the current agreement, which expires in 2013;
  • maintain a key interface, known as the PCI Express Bus, for at least six years in a way that will not limit the performance of graphics processing chips. These assurances will provide incentives to manufacturers of complementary, and potentially competitive, products to Intel’s CPUs to continue to innovate; and
  • disclose to software developers that Intel computer compilers discriminate between Intel chips and non-Intel chips, and that they may not register all the features of non-Intel chips. Intel also will have to reimburse all software vendors who want to recompile their software using a non-Intel compiler.

FTC Proposed Decision and Order in Intel Antirust Case

Posted in CPU Market Competition, Discounting and Rebates, FTC Case Against Intel, FTC Section 5, GPU Market Competition, Innovation and IP, Intel, Interoperability, Legal Filing, Netbook Market, US FTC | No Comments »

FTC Press Release – FTC Settles Charges of Anticompetitive Conduct Against Intel

Wednesday, August 4th, 2010

The FTC Press Release announcing the proposed settlement between Intel and FTC:

The Federal Trade Commission approved a settlement with Intel Corp. that resolves charges the company illegally stifled competition in the market for computer chips. Intel has agreed to provisions that will open the door to renewed competition and prevent Intel from suppressing competition in the future.

The settlement goes beyond the terms applied to Intel in previous actions against the company and will help restore competition that was lost as a result of Intel’s alleged past anticompetitive tactics. At the same time, the settlement will leave the company room to innovate and offer competitive pricing.

“This case demonstrates that the FTC is willing to challenge anticompetitive conduct by even the most powerful companies in the fastest-moving industries,” said Chairman Jon Leibowitz. “By accepting this settlement, we open the door to competition today and address Intel’s anticompetitive conduct in a way that may not have been available in a final judgment years from now. Everyone, including Intel, gets a greater degree of certainty about the rules of the road going forward, which allows all the companies in this dynamic industry to move ahead and build better, more innovative products.”

The press release explains that “A consent agreement is for settlement purposes only and does not constitute an admission of a law violation,” and announces the key components of the settlement:

Under the settlement, Intel will be prohibited from:

conditioning benefits to computer makers in exchange for their promise to buy chips from Intel exclusively or to refuse to buy chips from others; and
retaliating against computer makers if they do business with non-Intel suppliers by withholding benefits from them.
In addition, the FTC settlement order will require Intel to:

modify its intellectual property agreements with AMD, Nvidia, and Via so that those companies have more freedom to consider mergers or joint ventures with other companies, without the threat of being sued by Intel for patent infringement;
offer to extend Via’s x86 licensing agreement for five years beyond the current agreement, which expires in 2013;
maintain a key interface, known as the PCI Express Bus, for at least six years in a way that will not limit the performance of graphics processing chips. These assurances will provide incentives to manufacturers of complementary, and potentially competitive, products to Intel’s CPUs to continue to innovate; and
disclose to software developers that Intel computer compilers discriminate between Intel chips and non-Intel chips, and that they may not register all the features of non-Intel chips. Intel also will have to reimburse all software vendors who want to recompile their software using a non-Intel compiler.
The FTC vote approving the proposed settlement order was 4-0, with Commissioner William E. Kovacic recused. The order will be subject to public comment for 30 days, until September 7, 2010, after which the Commission will decide whether to make it final. Comments should be sent to: FTC, Office of the Secretary, 600 Pennsylvania Avenue, N.W., Washington, DC 20580. To submit a comment electronically, please click on: https://ftcpublic.commentworks.com/ftc/intel/.

The Full Press Release is Available on the FTC website

Posted in CPU Market Competition, Compiler Design, Discounting and Rebates, EC Case Against Intel, FTC Section 5, GPU Market Competition, Intel, News Item, US FTC | No Comments »

Proposed Consent Order Agreement Between Intel and FTC

Wednesday, July 28th, 2010

The written settlement agreement between Intel and the FTC lays the foundation for the final decision and order from the FTC:

This Agreement Containing Consent Order (“Consent Agreement”), by and between Complaint Counsel and Intel Corporation (“Respondent”), by its duly authorized officer and attorneys, is entered into in accordance with the Commission’s Rules governing consent order procedures. In accordance therewith the parties hereby agree that:

1. “Respondent” or “Intel” means Intel Corporation, its directors, officers, employees, agents, representatives, predecessors, successors, and assigns; and its joint ventures, subsidiaries, divisions, groups and affiliates controlled by Intel; and the respective directors, officers, employees, agents, representatives, predecessors, successors, and assigns of each. Respondent Intel Corporation is a corporation organized, existing and doing business under and by virtue of the laws of the State of Delaware with its office and principal place of business located at Mission College Boulevard, Santa Clara, California 95054.

2. Respondent has been served with a copy of the Complaint issued by the Commission charging it with violation of Section 5 of the Federal Trade Commission Act, as amended, and has filed its Answer to the Complaint denying those charges and asserting affirmative defenses.

3. Respondent admits all the jurisdictional facts set forth in the Complaint. 4. Respondent waives:

a. any further procedural steps;b. the requirement that the Commission’s Decision and Order (“Decision and Order”) contain a statement of findings of fact and conclusions of law.

c. all rights to seek judicial review or otherwise challenge or contest the validity of the Commission’s Decision and Order; and

d. any claim under the Equal Access to Justice Act

5. This Consent Agreement shall not become part of the public record of the proceeding unless and until it is accepted by the Commission. If this Consent Agreement is accepted by the Commission, it will be placed on the public record for a period of thirty (30) days and information in respect thereto publicly released. The Commission thereafter may either withdraw its acceptance of this Consent Agreement and so notify Respondent, in which event it will take such action as it may consider appropriate, or issue and serve its Decision and Order in disposition of the proceeding.

6. This Consent Agreement is for settlement purposes only and does not constitute an admission by Respondent that the law has been violated as alleged in the Complaint, or that the facts as alleged in the Complaint, other than jurisdictional facts, are true.

7. This Consent Agreement contemplates that, if it is accepted by the Commission, and if such acceptance is not subsequently withdrawn by the Commission pursuant to the provisions of Commission Rule 3.25(f), 16 C.F.R. § 3.25(f), the Commission may, without further notice to Respondent: (1) issue the Decision and Order, and (2) make information public thereto. When final the Decision and Order shall have the same force and effect, and may be altered, modified or set aside in the same manner and within the same time provided by statute for Commission orders. The Decision and Order shall become final upon service. Delivery of the Decision and Order to Respondent by any means specified in Commission Rule 4.4(a), 16 C.F.R. § 4.4(a), shall constitute service. Respondent waives any right it may have to any other manner of service. The Complaint may be used in construing the terms of the Decision and Order, and no agreement, understanding, representation, or interpretation not contained in the Decision and Order or the Consent Agreement may be used to vary or contradict the terms of the Decision and Order.

8. By signing this Consent Agreement, Respondent represents and warrants that it can accomplish the full relief contemplated by the Consent Agreement and the attached Decision and Order, and that all parents, subsidiaries, affiliates, and successors necessary to effectuate the full relief contemplated by this Consent Agreement and Decision and Order are bound thereby as if they had signed this Consent Agreement and were made parties to this proceeding and to the Decision and Order.

9. Respondent shall submit an initial compliance report no later than thirty (30) days after the Commission places the Consent Agreement on the public record, in each case pursuant to Commission Rule 2.33, 16 C.F.R. § 2.33, signed by the Respondent, setting forth in detail the manner in which the Respondent has to date complied or has prepared to comply, and will comply with this Agreement and with the Decision and Order

10. Respondent has read the Decision and Order contemplated hereby. Respondent understands that once the Decision and Order has been issued, it will be required to file one or more compliance reports showing that it has fully complied with the Decision and Order. Respondent agrees to comply with the Decision and Order from the date it signs this Consent Agreement. Respondent further understands that it may be liable for civil penalties in the amount provided by law for each violation of the Decision and Order after it becomes final.

The Proposed Consent Order Agreement Between Intel and the FTC

Posted in CPU Market Competition, FTC Case Against Intel, Intel, Legal Filing, US FTC | No Comments »

The FTC Complaint against Intel Corporation: Implications for Consumer Protection | Maureen K. Ohlhausen

Monday, July 26th, 2010

Maureen K. Ohlhausen, a partner at Wilkinson Barker Knauer and former Director of the Office of Policy Planning at the FTC, identifies 3 key areas of concern in the FTC’s complaint against Intel in an article for Competition Policy International.

1. “The FTC’s expansive interpretation of Section 5 of the FTC Act coupled with the proposed strengthening of the FTC’s remedial authority currently pending in Congress”

2. “the corrective advertising remedy it appears to seek”

3. “the truncated process it followed in bringing the complaint all signal extraordinary changes in the FTC’s approach that may have far-reaching effects for American business.

Ohlhausen concludes by saying:

These three aspects of the FTC’s complaint against Intel raise serious concerns about the agency’s highly aggressive posture in any future competition or consumer protection enforcement action. Under this new approach to Section 5, the Commission would have the power to sock business with expansive remedies for conduct that the courts have been reluctant to declare violations of the law and for which even the FTC itself has not clearly delineated the boundaries of legality. Combined with the Commission’s bid to enlarge its enforcement and remedial powers and its failure to ensure procedural fairness, the Intel complaint paints a picture of an agency anxious to expand its power and tighten its grip over American business.

The full article can be downloaded here: Maureen Ohlhausen – The FTC Complaint Against Intel Corporation

Posted in Analysis, CPU Market Competition, FTC Case Against Intel, FTC Section 5, GPU Market Competition, Intel, US FTC | No Comments »

FTC pursues Intel on new front: Graphics chips | CNET

Sunday, July 25th, 2010

CNET analyzes the one set of FTC allegations against Intel which were not borrowed from other litigation: supposed anticompetitive conduct in the GPU market. CNET talks with several experts and gives a nice overview of the role of GPUs in the modern computing landscape and the allegations being made about Intel’s behavior.

To date, the antitrust actions of regulators worldwide toward Intel have focused on sale practices for central processing units, or CPUs, a market over which the company has fought heavily with Advanced Micro Devices. On Wednesday, however, the FTC spelled out a litany of allegations about Intel’s alleged anticompetitive behavior in the market for graphics-processing units, or GPUs, in which Nvidia is a major player.

Why graphics, and why now?

“It would be really hard to sell the public on expending resources to take Intel through administrative proceedings when it had already paid over a billion dollars to AMD,” said Joshua D. Wright, a professor at George Mason University School of Law and a scholar in residence at the Federal Trade Commission until 2008. “[The FTC] needed to be seen as doing something new,” Wright said.

The article discusses the FTC’s focus on the Netbook Market:

One of the areas the FTC case zeroes in on is the burgeoning competition for chipsets in Netbooks–small, inexpensive laptops that are typically priced around $350. Netbooks are powered by Intel’s Atom processor–and integrated graphics silicon built into the chipset. In this market, Nvidia also sells its Ion chipset, which competes with Intel’s integrated graphics product.

“To combat [Atom] competition, Intel charged [PC makers] 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,” the FTC said.

…Intel says what it is doing is legal. “It’s all above cost. And that meets the legal standard worldwide,” Intel spokesman Chuck Mulloy said.

The rest of the article can be read on the CNET site.

Posted in CPU Market Competition, Discounting and Rebates, FTC Case Against Intel, GPU Market Competition, Intel, Netbook Market, News Item | No Comments »

CNET Column – FTC’s New Strategy “Kick ‘em When They’re Down.”

Sunday, July 25th, 2010

FTC’s new strategy: Kick ‘em when they’re down Author and fellow at Stanford Law School Center for Internet & Society, Larry Downes wrote a column suggesting the FTC’s case against Intel amounts to a new strategy of “Kick’em when they’re down.” In a CNET guest column, Downes argues that the FTC could just as easily make things worse for consumers:

The commission can blow all the smoke it wants to about ensuring “freedom of choice” for consumers, but for better or worse, this litigation and all the rest of it is being brought for the benefit of Intel’s competitors. Which is not to say that Intel hasn’t violated anticompetition laws and that those violations, if left unremedied, “will have an adverse effect on competition and hence consumers,” as the FTC delicately puts it.
Perhaps they will. But there is another, greater danger here, and that is the harm to the entire semiconductor industry that will result from regulators stepping in to resolve what are, in essence, private fights between Intel, its competitors, and some of its biggest customers.

The full article can be found on the CNET website here.

Posted in AMDvIntel Private Litigation in Delaware, Analysis, CPU Market Competition, Discounting and Rebates, EC Case Against Intel, FTC Case Against Intel, GPU Market Competition, Innovation and IP, Intel, NY Case Against Intel | No Comments »

Industry Analyst Peter Kastner Reviews FTC Case Against Intel in The Portlander

Sunday, July 25th, 2010

Industry analyst Peter S. Kastner wrote an op-ed for The Portlander newspaper that provides a pretty detailed analysis of the remedies proposed by the FTC in its lawsuit against Intel. Kastner argues that “The threat to Intel’s business by the FTC complaint is so great and the remedies so draconian that any outcome short of outright dismissal is likely to end up at the Supreme Court.”

He identifies a potentially key flaw in the GPU part of the FTC case: the entire industry is moving back toward integrated graphics:

The nub of the case is how Intel, AMD, and nVidia will compete in the increasingly integrated microprocessor and graphics processor (GPU) market. Both Intel and AMD are over the next year integrating the functions of the GPU into the microprocessor itself, eliminating the “chipset” that today runs integrated graphics in Core 2 and other Intel products.
That hurts nVidia, which makes chipsets with graphics, as well as making discrete graphics cards that compete with AMD’s ATI graphics unit. As in the childhood game of musical chairs, nVidia finds the music has stopped and it lacks a money-making chipset-technology chair to sit on. Meanwhile, AMD and Intel are, as usual, banging head to head bringing new microprocessor architectures to market in 2010 that will have better performance, energy savings, and new technology features.

He also identifies many problematic aspects of the FTC’s proposed remedies including this gem:

In Paragraph 8, the FTC seeks to prohibit Intel from manufacturing or distributing computer software, hardware, or other products that impair the performance, or apparent performance, of non-Intel microprocessors or GPUs. This remedy is game-changing, and with totally foreseeable consequences. First, more than half of all PCs lack discrete graphics cards with GPUs made by AMD and nVidia. These are mainstream PCs bought by the tens of millions by consumers and businesses. Those buyers do not need, or choose not to pay for, the added graphics capabilities from GPUs. All mainstream Intel PC designs today allow a buyer to add a non-Intel graphics card should they want to do so. However, AMD and nVidia each support multiple graphics cards in one, typically high-end, PC.

Second, to support multiple graphics cards requires a motherboard with considerably more robust electrical power, support chips, and circuit traces — all of which add to PC costs. Intel only supports multiple, full-speed (i.e., PCIe x16) graphics cards with products built around the X58 chipset and sold to enthusiasts. Mainstream and value market PCs cost less partly because they do not support multiple graphics cards running at full x16 speeds. The FTC’s Paragraph 8 would force Intel to the highest common denominator, adding approximately $100 retail to every desktop PC, in supporting multiple, full-speed graphics cards.

Click here to read the full article in The Portlander.

Posted in Analysis, Blog, CPU Market Competition, Discounting and Rebates, FTC Case Against Intel, GPU Market Competition, Innovation and IP, Intel | No Comments »

Senator Hatch Grills FTC’s Leibowitz on Antitrust Power Grab

Sunday, July 11th, 2010

[Originally posted on the ACT Blog]

As we’ve discussed before, the FTC recently decided to dust off its Section 5 authority to go after “unfair methods of competition” in lieu of using its tradition antitrust authority (Section 2) to pursue some of its tougher cases. This has many antitrust experts concerned, most notably, Bob Litan, former Clinton administration Justice official. In a discussion of the FTC’s use of Section 5 authority in its Intel lawsuit, Litan argued that:

The FTC apparently seeks to avoid proving harm to competition under the established standards of Section 2 because the causal link between the conduct it challenges and any conceivable harm to competition is weak. At a minimum, therefore, the relief sought by the FTC should reflect the tenuous connection between the conduct it challenges and the potential for harm to competition.

Apparently, Senator Orrin Hatch (R-UT) is also concerned by the FTC’s use of Section 2

During June 9th Senate Judiciary Committee’s hearing on Antitrust, Senator Hatch asked FTC Chairman Jon Leibowitz some tough questions. Hatch asked (based on our unofficial but mostly accurate transcript of the event):

I have serious concerns about the FTC’s decision to bring what are essentially antitrust cases under Section 5 of the FTC Act rather than under the Sherman Act…My concern is that there is a breadth of case law under the Sherman Act that gives businesses clear guidance as to what types of conduct are lawful or unlawful… However, it does seem to me that, with the FTC’s decision to start bringing cases under Section 5 of the FTC Act, these companies may see themselves facing complaints for conduct that they had good reason to believe was allowable under the law…Should we not be concerned that the uncertainty inherent in the FTC’s use of Section 5 will prevent businesses from competing aggressively? (more…)

Posted in Blog, CPU Market Competition, FTC Case Against Intel, FTC Section 5, Intel, US FTC | No Comments »

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