The United States has initiated an investigation into accusations that Intel's pricing policies at home and abroad were designed to maintain a near monopoly on the microprocessor market. (Lee Jin Man/The Associated Press)

U.S. opens antitrust investigation into Intel

By Stephen Labaton

Published: June 6, 2008

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WASHINGTON: The Federal Trade Commission has opened a formal antitrust investigation into Intel, the world's largest maker of computer microprocessors, for anticompetitive conduct, U.S. 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 Kovacic, the new chairman of the trade commission. The decision was supported by the agency's other commissioners. It reversed a decision by his predecessor, Deborah Majoras, who had been blocking the formal inquiry for many months, frustrating other senior commission officials and some lawmakers on Capitol Hill who have been seeking the investigation.

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 from the commission two months ago to become the general counsel at Procter & Gamble.

In a statement Friday, Intel acknowledged that it had received a subpoena Wednesday and said that it had been "working closely" with the trade commission on a less formal review that had been under way since 2006. The company vowed to cooperate with authorities.

"The company believes its business practices are well within U.S. law," the statement said. "The evidence that this industry is fiercely competitive and working is compelling."

Mike Silverman, an AMD spokesman, said the company would have no comment. Because 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 headed 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 inquiry to lay down an early marker.

AMD has waged a global legal and public relations campaign against Intel hoping to persuade U.S. and other national regulators that Intel's pricing practices violate antitrust laws.

The fight between the two companies - over a market that generates annual revenues of more than $225 billion - is among the largest antitrust matters pending before the regulators, and is considered to be among the most important since the landmark antitrust cases brought against Microsoft in the 1990s.

Though Intel and AMD are based in California - and their largest customers are U.S. computer and equipment makers - AMD'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 South Korean commission found that Intel violated antitrust law when it offered $37 million in rebates to Samsung Electronics and Trigem between 2002 and 2005 in return for a pledge by those personal computer makers not to buy microprocessors from AMD. Intel responded by saying it was disappointed with the decision and would likely appeal it.

Lawyers involved in the proceedings have said they expect European regulators to 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 limited their business with rivals, and by paying computer makers to either delay or cancel the introduction of products that used AMD 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 Attorney General Andrew Cuomo of New York.

AMD has sued Intel in the U.S. district court in Delaware. As a result of the large 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 percent to 90 percent of the microprocessor market. U.S. antitrust law permits a company to hold a monopoly, but it forbids a company from leveraging its dominance to restrict competition.