FTC Sues Intel As Early Christmas Present - HotHardware
FTC Sues Intel As Early Christmas Present

FTC Sues Intel As Early Christmas Present

AMD and Intel may have settled their court case and bills—Intel paid the smaller company $1.25 billion last week—but the manufacturer has been hit with an additional charge of unlawful behavior, this time from the Federal Trade Commission (FTC). According to the FTC's complaint, Intel has systemically waged a campaign to "shut out rivals’ competing microchips by cutting off their access to the marketplace. In the process, Intel deprived consumers of choice and innovation in the microchips that comprise the computers’ central processing unit, or CPU."

“Intel has engaged in a deliberate campaign to hamstring competitive threats to its monopoly,” said Richard A. Feinstein, Director of the FTC’s Bureau of Competition. “It’s been running roughshod over the principles of fair play and the laws protecting competition on the merits. The Commission’s action today seeks to remedy the damage that Intel has done to competition, innovation, and, ultimately, the American consumer.”

A significant portion of the FTC's complaint mirrors AMD's original allegations when the company filed its antitrust lawsuit. In its statement, the FTC there is reason to believe "that Intel carried out its anticompetitive campaign using threats and rewards aimed at the world’s largest computer manufacturers, including Dell, Hewlett-Packard, and IBM, to coerce them not to buy rival computer CPU chips. Intel also used this practice, known as exclusive or restrictive dealing, to prevent computer makers from marketing any machines with non-Intel computer chips."

The (Old) Alleged Misdeeds

If you aren't familiar with the details of Intel's rebate system (as described by AMD), it allegedly functioned as follows. Assume Dell expects to sell 1,000 computers in the next quarter. Dell goes to talk to Intel, and the CPU manufacturer offers the following deal: If Dell agrees to buy 90 percent or more of its CPUs from Intel, it will only have to pay $70 a chip. If, however, Dell chooses to buy just 80 percent of its chips from Intel, it will be charged $100 per processor. Given just how razor-thin OEM margins are in the Home/Home Office segment, that $30 price cut could make the difference between a profitable quarter or a loss.

This puts AMD in an impossible situation, as illustrated by the company's offer to give—give—HP one million processors for free. As memos from the EU investigation made clear, HP feared retaliation from Intel, and took only 160,000. If you literally can't give your product away because your competitor has designed a rebate system that makes it unprofitable for an OEM to accept it, that's a problem.

Trusts and monopolies make Teddy angry. You wouldn't like Teddy when he's angry.

Next up, there's the compiler issues. The FTC suit states: "In addition, allegedly, Intel secretly redesigned key software, known as a compiler, in a way that deliberately stunted the performance of competitors’ CPU chips. Intel told its customers and the public that software performed better on Intel CPUs than on competitors’ CPUs, but the company deceived them by failing to disclose that these differences were due largely or entirely to Intel’s compiler design."

There's no proof that Intel deliberately sabotaged its compiler, but 4-5 years ago it was a known fact that Intel compilers would not take advantage of AMD's SSE/SSE2 support. If a chip failed to return the "GenuineIntel" CPUID string, the compiler refused to perform any vectorization optimizations. You can read the in-depth details of the discovery here, but the takeaway is that patching the CPUID check increased performance on Opterons of the day by 10 percent.

NVIDIA Takes The Stage

New to the fight this time around is NVIDIA, who claims Intel's practice of charging more for an Atom processor ($45) than for the entire chipset + GPU ($25) constitutes illegal bundling. Intel's response is to shrug and say it offers volume customers better prices, but the $20 price gap is a full 5 percent on a $400 notebook and that's before we factor in the cost of an ION chipset. Even if NVIDIA's ION pricetag is quite modest—say, $20—OEMs who build on ION rather than GMA are paying 2.6x more.

The FTC is not asking for damages, but seeks 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 also may seek an order prohibiting Intel from unreasonably excluding or inhibiting the sale of competitive CPUs or GPUs, and prohibiting Intel from making or distributing products that impair the performance–or apparent performance–of non-Intel CPUs or GPUs."

Intel's Response

Intel's response to the FTC complaint has thus far been identical to the boilerplate the company trotted out in Japan, Korea, the EU, and (when it was applicable), the AMD antitrust case. The company believes it has done nothing wrong, its actions have benefited consumers, and cheaper, faster computers have been the end result. This is rather disingenuous. The fact that computer prices have fallen while performance improved does not mean consumers weren't harmed by Intel's alleged conduct. Even if Intel's actions are ruled to have caused no harm to consumers, the company may still have abused its market position and illegally hampered its competitor.

The FTC's burgeoning investigation could be over by New Years with a series of corporate handshakes and a promise to never engage in certain types of behavior while never admitting such events ever occurred. Given the fact that the commission filed after AMD withdrew its own complaint, however, this seems unlikely. Intel would be quick to point out that it has never been found guilty of any abuses or violations in a court of law, but while that's true, it's also beside the point. To date, regulatory bodies in four different countries—the EU, US, Korea, and Japan—have either filed suit against Intel, issued findings of fact that state Intel abused its market position, or fined the company $1.45 billion. Four different countries/governments, four different cultures, four different levels of friendliness towards big business. In each case, Intel has maintained its innocence—and to date, no one's ever buys it.

It might be time for a new defense strategy.
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Thanks for taking the time to fill in a good bit of the details Joel. Hopefully people will actually read it before responding positively or negatively based solely on current fanboyism.

My own opinion is that this has been bad for the customer. Intel's got great (if not the best) engineers, but their marketing/sales/management is harming their public image. Of course, Intel's doing what's best for Intel's profits... not the customer or their business partners - so while I don't approve of their actions, I do understand the motivation.

If Intel had adopted different business practices, AMD and others would most likely have more market share. But, it's just as likely that we would have seen more aggressive pricing and tech improvements as a result of the competition and increased funding to other companies R&D.

In short, monopolies cause stagnation. I'm for any action that puts everyone on more even ground, as long as it doesn't go overboard and tip things the other way such as to give the other companies an unfair advantage.

Disclaimer: I have no favorite CPU manufacturer. My last three systems have been Intel, but I also own a couple of AMD-based machines. I'd buy VIA if they were the best match price/performance-wise for a project, when it got time to buy. My favorite CPU is the MOS6510!

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I agree that some of their practices are questionable... but at the same time... if they can afford to cut their prices incredibly low... they should be allowed to. It is their product after all. If the competition can't keep up... they should find a way.

I don't think it is right however to offer that severely cut price with the stipulation that you can't buy someone elses stuff. But having to by XXX amount instead of XXX percent would be more reasonable. But the price should be offered to everyone... not just some.

And it is pretty obvious they cut the price on the Atom GMA set to put Nvidia out of the picture. If they can get away with it they will probably do the same thing with their up and coming discreet graphics card.

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You make a product and you sale it. The people will buy the product, Intel never put a gun in anyone head and said hey buy my product now. this is the only thing that drive me insane about this stupid law.

if you develop something is in your best interest of selling that product and making money that what intel did. i mean i would be one that would put it plain and simple back in the 90's and early 2000 intel sucked @ss... AMD had the opportunity and they didn't leveraged as well. Hey they are the underdog sure they are look the perfect example APPLE!, everyone didn't felt sorry about APPLE while Microsoft was flying high nobody care. now that APPLE has become what i like to call a "Must have fashion" (I'm guilty of that) then is growing and increasing market share.

AMD should redevelop themselves instead of whining like that highschool loser that is always finding something to whine about.

a perfect example in that paragrah is this; "New to the fight this time around is NVIDIA, who claims Intel's practice of charging more for an Atom processor ($45)(is their damn processor who is going to pay those technician? you NVIDIA?) than for the entire chipset + GPU ($25) constitutes illegal bundling(Translation it means I DON"T MAKE A BETTER PROCESSOR THAN YOU SO I WILL GO TO THE COURT AND SUE YOU BECAUSE OF THAT). Intel's response is to shrug and say it offers volume customers better prices, but the $20 price gap is a full 5 percent on a $400 notebook and that's before we factor in the cost of an ION chipset. Even if NVIDIA's ION pricetag is quite modest—say, $20—OEMs who build on ION rather than GMA are paying 2.6x more"

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AMD should redevelop themselves instead of whining like that highschool loser that is always finding something to whine about.

If this was merely about 'whining' then Intel wouldn't be in such serious sh*t. Do you remember when Dell and Gateway didn't offer AMD processors? In hindsight, the reasons for that now become crystal-clear.

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>> You make a product and you sale it.

Unless Intel pays major manufacturers billions of dollars (seriously, Dell got $2B in rebates) not to carry your product. That's exactly what NY's suit, filed last month, says they did.  And, I believe it because that's what they were also said to be doing in the EU going all the way back to 2003.

It wasn't the competition that was "whining like a highschool loser".  A lot of the people complaining have been the PC builders, who have been given an ultimatum:  "Make 90% of your PCs use Intel CPUs, or we'll raise your costs so high that you can't compete with outer PC builders."

How is that at all a fair market, or have anything to do with who makes the better processor?

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You do seem to have missed a really basic point, namely that Intel wasn't playing "fair." If AMD literally can't give its product to HP because HP can't financially afford to risk financial retribution from Intel, that is not, by any stretch, a "free" market.

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