Federal Trade Commission orders antitrust inquiry into Intel's business practices
07 Jun 2008
Washington: The Federal Trade Commission (FTC) has confirmed that it is investigating Intel Corp. for anti-competitive pricing and practices.
Intel has been served a subpoena by the FTC in the case.
Intel is the world's largest computer chip maker. The company has been accused of engaging in practices that cut out its arch competitor, Advanced Micro Devices (AMD), out of the marketplace.
Industry sources indicate that as part of distribution, Intel would create quotas with key retailers that would effectively make them stock up on Intel's chips, and would go to the extent of threatening retaliation against customers.
The FTC has issued subpoenas to Intel, Advanced Micro Devices (AMD) and others in with a view to reveal more information about Intel's business practices. Both Intel and the FTC have confirmed that Intel is the focus of a probe. Intel continues to maintain that its practices are legal.
South Korea had fined Intel $25 million this week, saying that Intel offered illegal rebates to discourage customers from going with competitor AMD. The Korea Fair Trade Commission said Intel offered Samsung Electronics Co. and Trigem Computer Inc. $37 million in rebates between 2002 and 2005, stipulating that the computer makers agree not to buy AMD chips.
Intel, which commands around 80 per cent of the microprocessor market, issued a statement saying that it has been working with the FTC since 2006 on an informal inquiry into competition in the microprocessor market, and has furnished thousands of documents. "The company believes its business practices are well within US law. The evidence that this industry is fiercely competitive and working is compelling. For example, prices for microprocessors declined by 42.4 per cent from 2000 to end of 2007. When competitors perform and execute, the market rewards them,'' the company said in its statement.
AMD has also received a subpoena from the FTC, and says it will cooperate with the investigation. In a statement, AMD executive vice president and chief administrative officer Tom McCoy said, "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. In every country around the world where Intel's business practices have been investigated, including the decision by South Korea this week, antitrust regulators have taken action."
Last year, The European Commission complained against Intel's rebate practice, claiming it to be anti-competitive. AMD has sued Intel in US District Court in Delaware in a private antitrust suit that is likely to go to trial next year. Intel is also being investigated for similar conduct in the state of New York.
In case of outcome not favouring Intel, the company could see heavy fines and regulations that will force it to modify its business tactics.
Intel confirmed in a statement that the the US FTC had served a subpoena related to Intel's business practices with respect to competition in the microprocessor market onm on 4 June.
The chip mkaer said that it "has been working closely with the FTC 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."
It said "By proceeding to a subpoena, the commission will be able to obtain not only information that Intel has already committed to provide but also information from other parties." and said that it would "work cooperatively with the FTC staff" to comply with the subpoena and continue providing information.
IT also said that its business practices were well within US law. "The evidence that this industry is fiercely competitive and working is compelling. For example, prices for microprocessors declined by 42.4 per cent from 2000 to end of 2007. When competitors perform and execute the market rewards them. When they falter and under-perform the market responds accordingly."
