The Federal Trade Commission, in a widely anticipated move, has voted in favor of an antitrust suit against Intel Corp, alleging that the chip-making giant has misused its monopoly power to cement its dominance over the microprocessor market. The FTC staged a vote on Monday, which ended three-to-one in favor of initiating legal action against the Santa Clara-based company, with Commissioner Orson Swindle the lone dissenter. The FTC alleged that Intel illegally used its market power when it denied three of its customers continuing access to technical information necessary to develop computer systems based on Intel microprocessors, and took other steps to punish them for refusing to license key patents on Intel’s terms. The FTC complaint contends that when the three companies in question – Digital Equipment Corp, Intergraph Corp and Compaq Computer Corp – sought to enforce their own microprocessor patents against Intel or other computer companies who buy Intel products, Intel retaliated by cutting off the necessary technical information and threatening to cut off the supply of microprocessors. Innovation is critical to economic progress, and patents play a crucial role in encouraging that innovation, said William Baer, Director of the FTC’s Bureau of Competition, in an official statement. As a monopolist, Intel can compete by producing better, cheaper and more attractive products. It cannot act to cement its monopoly power by preventing other firms from challenging its dominance. Intel has acted illegally. It has used its monopoly power to impede innovation and stifle competition, Baer said. The FTC alleges that by its actions in at least three separate instances, Intel sought to injure a customer until that customer surrendered the patent licenses Intel desired. The scope of the case and the remedial actions sought are limited, though. The FTC is seeking a notice of contemplated relief that would prevent Intel from repeating the kind of conduct it has engaged in with respect to Digital, Intergraph, and Compaq: using the threat of a discriminatory cut-off of products or technical information to force customers to license or sell their intellectual property to Intel. The FTC is seeking an order that would leave Intel free to change customer’s access to products and technology when it has legitimate business reasons, but would restrict it from attempting to coerce the licensing or sale of property. The case will be heard by an FTC judge, who will have a year to decide the case. Appeals can then be made to a Federal Court of Appeals. The FTC is expected to ask for a fall hearing date. Intergraph, which had previously filed its own antitrust suit against Intel and was awarded a preliminary injunction, issued a statement applauding the fact that FTC investigators apparently believe our concerns reflect a broad threat to the computer industry. Intel, for its part, issued a statement that contended that the FTC’s action is based upon a mistaken interpretation of the law and the facts. Intel also said that the decision is an attempt to assert a new legal theory under antitrust law. It intends to defend itself through the administrative complaint process and, if necessary, appeal to a federal court. It said that it believed ultimately that process will conclude that our actions are lawful. Intel shares responded well to the news, slipping just $0.50 to $69.3125.
