AAI Calls FTC/INTEL Settlement an Enforcement Victory

The American Antitrust Institute believes yesterday’s settlement by the Federal Trade Commission (FTC) and Intel Corporation will benefit competition and consumers worldwide. 

“It is the most important antitrust enforcement victory achieved so far during the Obama Administration,” said AAI President Bert Foer. “In light of the crucial importance of the $30 billion-plus chip market to the United States and the world economy, this action ranks high on the FTC's all time list of accomplishments.”

In certain respects, this settlement builds upon and extends the success of AMD in its privately settled case against the chipmaker and a similar victory by the European Union (EU), as well as successful government prosecutions in Korea and Japan.  However, the AAI believes the remedy achieved by the FTC today goes significantly further.  The FTC's Analysis of Proposed Consent Order to Aid Public Comment provides important guidance to the high tech world as to how the Commission intends to address a number of important competition issues that continue to arise in an age of digital convergence.

The settlement covers the markets for graphic chips and chipsets as well as the market for CPUs, and prevents Intel from leveraging its CPU monopoly into these other markets.  For the first time, the FTC clearly prohibits "market share discounts" and "first dollar discounts" by a dominant firm because of their significant anticompetitive effects.  The settlement also prevents Intel from retaliating against OEMs or retailers that use or carry chips made by Intel's rivals.  It prohibits Intel from selling its products below cost, carefully defining the appropriate cost terms.

Intel is required to allow graphic chips made by its rivals to seamlessly interface with their x86 chips for six years.  Intel also is prohibited from engaging in predatory design - making changes that have the sole effect of harming rivals, with the burden, importantly, on Intel to show the design's consumer benefits. In the absence of pretext, the presence of a new benefit would preclude further investigation into a design decision. “The FTC's settlement carefully preserves Intel's incentive and ability to innovate, while adopting a burden that is less favorable to the manufacturer than most case law provides,” said Foer.

To assure this agreement will be faithfully implemented, the FTC will monitor Intel's compliance for the next decade.  Although there is an ongoing action involving essentially the same charges by New York State, and Intel has appealed decisions in the EU and Korea, this settlement will do more than produce tremendous benefits for competition and consumers.  It also will permit Intel to focus its energies on what it does best: making chips.

For more information contact:

AAI President Bert Foer at 202-276-6002 bfoer@antitrustinstitute.org

AAI Director Robert Lande at 301-585-5229 rlande@antitrustinstitute.org

AAI Vice President Diana Moss at 720-233-5971 dmoss@antitrustinstitute.org

AAI Senior Fellow Norman Hawker at 269-350-3662 norman.hawker@wmich.edu

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The American Antitrust Institute is an independent non-profit education, research and advocacy organization. Since its formation in 1998, the AAI’s mission has been to increase the role of competition, assure that competition works in the interests of consumers, and challenge abuses of concentrated economic power in the American and world economy. To learn more about the AAI, please visit www.antitrustinstitute.org