Intel Said to Be Facing Antitrust Investigation
The Federal Trade Commission has opened a formal antitrust investigation of Intel, the world’s largest maker of computer microprocessors, for anticompetitive conduct, government officials and lawyers involved in the proceeding said Friday.
The officials and lawyers said that in recent days Intel, its smaller rival Advanced Micro Devices, and several of the world’s largest personal computer makers that buy semiconductors from the two companies have begun to receive subpoenas from the commission.
The investigation into accusations that Intel’s pricing policies in the United States and abroad have been designed to maintain a near-monopoly on the microprocessor market was authorized by William E. Kovacic, the new chairman of the trade commission, and has the support of the agency’s other commissioners.
It reversed a decision by his predecessor, Deborah P. Majoras, who had been blocking the formal inquiry for many months, frustrating other senior commission officials and some lawmakers on Capitol Hill.
Ms. Majoras is a former senior official in the antitrust division at the Justice Department who was an architect of the Bush administration’s antitrust settlement with Microsoft in 2001. She stepped down two months ago to become the general counsel at Procter and Gamble.
There was no immediate comment from Intel or A.M.D. about the Federal Trade Commission’s decision.
Since it will almost certainly be many months before the commission decides whether to make a case against Intel, as European and Asian regulators already have, the investigation could mark an important early test for the next administration on antitrust and competition policy.
Technically independent of the White House, the trade commission is led by appointees of the president. An administration seeking to show it is more vigorous on antitrust policy than the Bush administration could use the Intel investigation to lay down an early marker.
A.M.D. has waged a global legal and public relations campaign against Intel hoping to persuade American and foreign regulators that Intel’s pricing practices violate antitrust laws.
The fight between the two—over a market that generates annual revenues of more than $225 billion — is among the largest antitrust matters pending before American and foreign regulators, and is considered to be among the most important since the antitrust cases brought against Microsoft in the 1990s.
Though Intel and A.M.D. are based in California — and their largest customers are American computer and equipment makers — A.M.D.’s complaints have received considerably more traction abroad.
This week, the Korean Fair Trade Commission said it would order Intel to pay more than $25 million for violating its fair trade laws. The Korean commission found that Intel violated antitrust law when it offered $37 million in rebates to the personal computer makers, Samsung Electronics and the Trigem Company, from 2002 to 2005 in return for a pledge not to buy microprocessors from A.M.D. Intel responded by saying it was disappointed with the decision and was likely to appeal it.
Lawyers involved in the proceedings say they expect that European regulators will expand their statement of objections, or official charge sheet, against Intel. Last year, the European Commission said the company had engaged in anticompetitive conduct by providing rebates to customers that limit their business with rivals and by paying computer makers to either delay or cancel the release of products that used A.M.D. microprocessors.
The European complaint said that Intel had abused its market dominance “with the aim of excluding its main rival from the market.” The complaint was the culmination of a six-year investigation.
Intel’s pricing practices are also being reviewed by investigators working for the New York attorney general Andrew Cuomo.
And A.M.D. has sued Intel in Federal District Court in Delaware. As a result of the crushing amount of evidence being gathered by both sides, a special master in that case this week delayed the start of the trial to early 2010. The trial had originally been scheduled for next spring.
Intel, which was founded by engineers who both developed the chip and made repeated innovations that made it smaller and more powerful, controls 80 to 90 percent of the microprocessor market. American antitrust law permits a company to hold a monopoly, but it forbids a company from leveraging its dominance to restrict competition.
A.M.D. has asserted that Intel offers rebates and discounts that, in effect, result in its chips being sold at below the cost of production, a practice that some courts in cases involving other companies have said can be a violation of antitrust law.
Intel denies that its discounts and rebates drive its prices below cost, or at predatory levels. Intel has said that it offered legitimate discounts based on the volume of chips that have been purchased by companies, and that consumers benefit when personal computer manufacturers — using the discounts — are able to lower the cost of making their products.
Intel executives have also said that, to the extent the foreign antitrust regulators have come down harder on the company than American officials, it is a reflection of the different approach towards antitrust law. The American approach towards antitrust has been historically aimed at protecting competition, while the others use antitrust often to protect rival companies.