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Intel's business practices restricted under antitrust settlement with FTC

By Jia Lynn Yang
Washington Post Staff Writer
Thursday, August 5, 2010; A12

Capping a decade-long push by the federal government to check the power of this country's biggest tech companies, the Federal Trade Commission is banning Intel from a slew of practices deemed unfair and deceptive as part of an antitrust settlement over charges that the firm exploited its dominance in the chip market to elbow out competitors.

The FTC doesn't have the authority to fine the company unless it violates the terms of the settlement, but the agency outlined a deal Wednesday restricting Intel's business practices in ways that go further than past cases in which the firm has been accused of not playing fair with rivals. Officials said the deal would benefit consumers buying computers by increasing competition in the chipmaking business.

"This is an exceptionally important case," FTC Chairman Jon Leibowitz said. "And the commission was deeply troubled by Intel's actions."

The deal marks the end of a chapter in which federal regulators went after tech titans such as Microsoft and Intel that pioneered new business practices in the 1990s and grew into global behemoths. Antitrust regulators are now scrutinizing a new generation of dominant tech firms -- Google, for instance.

The agency investigated Intel's practices going back at least 10 years and found the company "stepped well over the line," Leibowitz said. The FTC said Intel told customers it would not sell products to them unless they agreed to stop doing business with Intel's rivals. The agency also said Intel redesigned its central processing units, or CPUs, to throw off competitors by making it harder for their chips to work with Intel's.

As part of the settlement, Intel said in a statement Wednesday that the company does not admit to breaking the law and that the agency's allegations are all false.

"This agreement provides a framework that will allow us to continue to compete and to provide our customers the best possible products at the best prices," said Doug Melamed, Intel senior vice president and general counsel. "The settlement enables us to put an end to the expense and distraction of the FTC litigation."

Intel, based in Santa Clara, Calif., boasts more than 80 percent of microprocessor sales worldwide and in July reported its best quarterly earnings ever.

The settlement lays out a number of restrictions on the chipmaker. The FTC is prohibiting Intel from practices that punish customers for buying chips from rivals or reward them for not purchasing those chips. The agency is also forcing Intel to relax its intellectual property agreements with chipmakers Advanced Micro Devices (AMD), Nvidia and Via to give them more freedom to pursue mergers and joint ventures without having to worry about suits from Intel for patent infringement.

The deal also calls for Intel to make it easier for manufacturers of chips complementary to Intel's to develop their products. The company will have to maintain an open industry-standard connection, known as a "bus," that will let manufacturers of graphics chips connect their products to Intel's CPUs.

The company has faced antitrust charges before from rivals and regulators. In November, Intel and AMD agreed to a $1.25 billion settlement after AMD sued Intel for antitrust reasons. In May 2009, the European Union fined Intel $1.45 billion, the biggest fine for breaking competition laws in E.U. history. Intel is appealing the decision.

In its announcement Wednesday, the FTC went further than past rulings by seeking to regulate Intel's treatment of intellectual property and product design issues -- not just its contracts with customers. The FTC voted unanimously to approve the settlement rather than go to trial. It will seek public comment for 30 days, after which the commission will decide whether to finalize the deal.

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