ACT RESPONDS TO FTC LAWSUIT AGAINST INTEL

FTC IGNORES PLEAS FOR CAUTION AND FILES LATE HOMEWORK ASSIGNMENT

Washington – Today, the Federal Trade Commission sued Intel Corp. charging that the company has abused its dominant position in the computer chip market.  This lawsuit comes just days after ACT asked the FTC to proceed with extreme caution in this case, because it has the potential to disturb the dynamics that have pushed the chip industry to unprecedented levels of innovation and price decreases over the past 40 years.

In response to the lawsuit, ACT president Jonathan Zuck said:

“The FTC’s complaint is a hasty solution to some hypothetical and imaginary issues. Following the settlement between Intel and AMD that resolved the core issues that the FTC has been investigating for more than two years, the FTC has slapped together a completely new set of allegations into this complaint. The result is a complaint reads like a late homework assignment, with little substance and lots of rhetoric.”

“The decision to pursue a case under Section 5 versus Section 2 of the Sherman Act seems to be a realization that it is impossible to make the case that consumers have been harmed by higher prices or less innovation. Commissioner Rousch admits as much in his opinion.  The pace of innovation and price reductions in the chip market is simply unparalleled by any other industry.”

“One of the most troubling aspects of this complaint is that it appears to advocate for an expropriation of Intel’s intellectual property, which is a dangerous precedent for all innovative firms large and small.”

“The real question is “why is the FTC rushing this case?” They took more than 2 years to investigate their concerns about Intel’s pricing programs without filing a case, but they are now pushing these new claims out the door without giving them more than a couple months of thought? All companies deserve a fair and transparent investigation.”

As ACT found in our recent study, Exponential Innovation, the computer chip market is delivering unparalleled benefits to consumers and OEMS.

• Innovation Levels Outpace Any Other Industry – The chip industry has kept pace with Moore’s Law, doubling the speed of computer chips every 18-24 months.  From 2000-2008 alone, the speed of the average chip has increased by 28 times.
  
• Chipmakers Continue Massive R&D Investments – Chipmakers spent $45.7 billion in 2007 on R&D and related engineering activities.  With R&D investments greater than 15 percent of sales, chipmakers rank among the top R&D investors in a cross-industry comparison.   In absolute numbers, the semiconductor industry is expected to spend nearly $35 billion in 2009, placing it below the pharmaceutical industry but above the software industry, which includes such R&D heavyweights as Microsoft and Google.
  
• Prices Decrease Faster Than Any Other Industry – According the Bureau of Labor Statistics, the quality-adjusted price of computer processors has fallen faster than any other industry in the past decade.  Computing power that cost $2.73 in 1996 cost a penny in 2006, and, from 2000 to 2008, relative processor performance among high-end chips increased by approximately 28 times while the price was cut in half.
  

The full “Exponential Innovation” Report can be found here: http://www.actonline.org/library/act-paper-exponential-innovation.pdf

ACT and 37 Small Tech Firms Urge FTC To Proceed with Caution on Intel

ACT Submits to the FTC a New Analysis of Computer Chip Market and Letter from 37 Tech Firms

Washington – The Association for Competitive Technology (ACT) announced today that it is asking the Federal Trade Commission (FTC) to proceed with extreme caution and avoid any actions that may reduce incentives for innovation or raise chip prices as the agency continues its antitrust review of Intel and computer chip market.  ACT recently presented the Commission a letter signed by 37 members and a new analysis of innovation in the computer chip market and its symbiotic relationship with software innovation.

ACT and its members are particularly concerned by recent reports suggesting that the FTC is still considering antitrust action against Intel despite the recent private settlement between Intel and AMD.

“While competitors and their lawyers can debate the merits of various types of rebate programs, no one is debating the fact that Intel, AMD and others are delivering incredible innovation and value for software developers and consumers. No other industry can match the pace of innovation reflected in Moore’s Law or the rapid price declines that have defined this market for the past forty years.  The FTC must be very careful not to disturb the incentives that have been driving market players to roll out better and lower priced chips every year,” said ACT president Jonathan Zuck.

37 small information technology companies signed onto a letter that was also sent to the FTC urging the consider this matter thoroughly.

“The health and vibrancy of the computer chip market are beyond debate. Therefore, we in the software development community ask government regulators to proceed with extreme caution and avoid any actions that may reduce innovation or lead to higher chip prices,” said the letter.

Software developers like those represented on the petition rely heavily on processor innovation and cost decreases to enable new features and innovations in their own products.  The drastic increases in speed and decreases in price are making ground-breaking new medical, gaming, and animation software possible.

ACT’s report entitled “Exponential Innovation” by Braden Cox and Nora von Ingersleben finds that the computer chip market is incredibly innovative and competitive.

• Innovation Levels Outpace Any Other Industry – The chip industry has kept pace with Moore’s Law, doubling the speed of computer chips every 18-24 months.  From 2000-2008 alone, the speed of the average chip has increased by 28 times.
  
• Chipmakers Continue Massive R&D Investments – Chipmakers spent $45.7 billion in 2007 on R&D and related engineering activities.  With R&D investments greater than 15 percent of sales, chipmakers rank among the top R&D investors in a cross-industry comparison.   In absolute numbers, the semiconductor industry is expected to spend nearly $35 billion in 2009, placing it below the pharmaceutical industry but above the software industry, which includes such R&D heavyweights as Microsoft and Google.
  
• Prices Decrease Faster Than Any Other Industry – According the Bureau of Labor statistics, the quality-adjusted price of computer processors has fallen faster than any other industry in the past decade.  Computing power that cost $2.73 in 1996 cost a penny in 2006, and, from 2000 to 2008, relative processor performance among high-end chips increased by approximately 28 times while the price was cut in half.
  

The full letter can be found here: http://www.actonline.org/documents/091210-act-letter-to-ftc-on-intel.pdf

The full “Exponential Innovation” Report can be found here: http://www.actonline.org/library/act-paper-exponential-innovation.pdf


The Association for Competitive Technology (ACT) is an international education and advocacy group for the technology industry. Focusing on the interests of small and mid-size entrepreneurial technology companies, ACT advocates for a “Healthy Tech Environment” that promotes innovation, competition and investment. ACT has been active on issues such as intellectual property, international trade, e-commerce, privacy, internet policy and antitrust. ACT represents more than 3000 software developers, systems integrators, IT consulting and training firms, and e-businesses from around the world.

Statement of Association for Competitive Technology President Jonathan Zuck on New York Attorney General’s Antitrust Lawsuit Against Intel

“The software development community is concerned that this lawsuit will be counterproductive and may jeopardize the unparalleled innovation and value the chip industry has produced over the past 20 years. While the attorney general makes some bold accusations about Intel’s behavior, experts are already questioning whether there is any real evidence to support the complaint.”

“The fact that the chip industry has delivered exponential innovation while decreasing prices faster than any other technology industry seems to be a significant hole in the case. From 2000 to 2008, computer chips have gotten 28x faster at the same time real prices have dropped by nearly 50 percent.”

“We in the software industry have benefited greatly from the vigorous competition and innovation in the chip market.  It has enabled us to deliver touch interfaces, powerful health IT solutions, and fostered the evolution from ‘Pong’ to the lifelike reality of modern game technology like ‘The Sims’ and ‘Halo.’”

“New York’s effort to micromanage competition in the chip market may benefit AMD, but it is also likely to harm the interests of software developers and consumers.”

The Association for Competitive Technology (ACT) is an international education and advocacy group for the technology industry. Focusing on the interests of small and mid-size entrepreneurial technology companies, ACT advocates for a “Healthy Tech Environment” that promotes innovation, competition and investment. ACT has been active on issues such as intellectual property, international trade, e-commerce, privacy, internet policy and antitrust. ACT represents more than 3000 software developers, systems integrators, IT consulting and training firms, and e-businesses from around the world.