Posts
WASHINGTON — A global legal battle between the two largest makers of computer processors took an abrupt turn this week when the Federal Trade Commission opened a formal antitrust investigation of the Intel Corporation.
For years, Advanced Micro Devices, a smaller rival of Intel, has been scouring the world in search of regulators in Europe, Asia and the United States who would agree to prosecute Intel for what A.M.D. maintains are anticompetitive pricing practices.
The worldwide campaign — over a market that generates more than $225 billion in global sales each year — has cost both companies tens of millions of dollars in legal and public relations expenses. A.M.D. has met with considerable success in Europe, Japan and Korea.
In the United States, however, the quest had not gained much ground among state authorities or federal regulators appointed by President Bush, who have taken a less aggressive antitrust approach than their foreign counterparts.
But on Friday the federal approach toward the case began to change — and those changes could accelerate depending on the antitrust stance of the next administration and its regulatory appointees.
The investigation, into accusations that Intel’s pricing is intended 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, officials said.
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, a former senior official in the antitrust division at the Justice Department, where she was an architect of the Bush administration’s antitrust settlement with Microsoft in 2001, left the commission two months ago, and the seat remains vacant.
Since it will almost certainly be many months before the commission decides whether to make a case against Intel, as European and Asian regulators have already done, the investigation could mark an important early test for the next administration on antitrust policy.
Among the states, only the New York attorney general, Andrew M. Cuomo, has publicly signaled his intention to review the matter. Other states have declined to take action. When the attorney general of California, Jerry Brown, rejected A.M.D.’s complaint this year, he said in The San Francisco Chronicle that he was “not barking at every truck that comes down the street.”
A.M.D. has accused Intel of systematically giving its customers — the world’s leading personal computer makers — large discounts, at times below Intel’s own manufacturing costs, in exchange for commitments not to do business with competitors. Intel has responded that its discounts were legitimate incentives, not offered below cost, and benefiting customers who can buy computers at lower prices.
Intel has also maintained that A.M.D. tried to make up in the courts for its failures in the marketplace.
While Intel has denied the allegations, A.M.D. executives are hoping the case will present an easy opportunity for the next administration to take a noticeably more aggressive approach to competition issues. Technically independent of the White House, the trade commission is led by appointees of the president.
D. Bruce Sewell, Intel’s senior vice president and general counsel, said that because American and foreign antitrust law are fundamentally different, the company is confident of vindication, regardless of the leadership of the Federal Trade Commission next year, when the new president can fill the vacant seat and name its own chairman.
Still, Intel has been planning to increase the size of its Washington operations, a move that could be helpful both for the antitrust case and a variety of other issues before Congress and the regulators that are important to the company.
The official signs of the heightened scrutiny by the commission came in recent days when Intel, Advanced Micro Devices, and several of the world’s largest personal computer makers that buy semiconductors from the two companies began to receive subpoenas from the agency.
Commission officials have also been working closely with their foreign counterparts, and have had access to the same evidence that is being used abroad to make the cases against Intel.
Mr. Sewell said that Intel had been working closely with the trade commission on a less formal review that had been under way since 2006. He said the company would continue to cooperate with authorities.
A.M.D. executives said they were pleased with the commission’s decision.
“Intel must now answer to the Federal Trade Commission, which is the appropriate way to determine the impact of Intel practices on U.S. consumers and technology businesses,” said Tom McCoy, executive vice president for legal affairs at A.M.D. “In every country around the world where Intel’s business practices have been investigated, including the decision by South Korea this week, antitrust regulators have taken action.”
The fight between the two companies 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.
A.M.D.’s latest success abroad came just this week, when 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 had 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 would probably appeal.
Lawyers involved in the proceedings say they expect that later this year 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.
A.M.D. has also 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 were leaders in developing and advancing computer chip technology, 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 prices 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 to predatory levels. Intel has said that it offers 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 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 was a reflection of the different approach toward antitrust law. The American approach toward antitrust has been historically aimed at protecting competition, while the others use antitrust often to protect rival companies.
No comments:
Post a Comment