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FTC hails Intel antitrust settlement a victory for consumers

SAN FRANCISCO — The Federal Trade Commission is trumpeting its settlement with Intel Corp. as a victory for consumers who have overpaid for computer chips for a decade, though computer buyers shouldn't expect a sudden drop in prices.

The deal announced Wednesday represents the end of the harshest antitrust lawsuit Intel has faced yet from government regulators, and it imposes the strictest set of changes in the way Intel does business.

But any changes as a result of the FTC's actions would likely be gradual, and possibly imperceptible, to most people.

One reason is that the prices for computer chips have steadily fallen anyway as technological advancements make it cheaper for companies such as Intel to make more powerful chips. Consumers have gotten used to getting more computer for less money every time they go shopping.

The FTC's case is built on the argument that those prices haven't fallen as fast as they could have. It has accused Intel of contributing to that by abusing its position as the No. 1 supplier of both central processing units (CPUs) and graphics processing units (GPUs) to box rivals out of the market and stifle competition.

CPUs are the "brains" of computers and are among their most expensive parts, often making up about 15 to 20 percent of a computer's price. GPUs are chips that make graphics look good on computer screens.

FTC Chairman Jon Leibowitz said Intel's behavior stepped well over the line — moving beyond "the type of aggressive competition on the merits that we all encourage and into the realm of unfair, deceptive and anticompetitive conduct."

Intel has long denied the charges and has pointed to the industry's falling prices as evidence that the market is functioning normally.

Intel's general counsel, Doug Melamed, said the settlement "provides a framework that will allow us to continue to compete and to provide our customers the best possible products at the best prices." Melamed added that the settlement puts an end to the "expense and distraction" of the litigation.

Jim McGregor, a semiconductor analyst with market researcher In-Stat, said technology companies have long used exclusivity agreements as weapons.

"We've seen that over and over again where they've used that as a hammer," he said. The FTC's case is a "huge statement to the industry that, 'You're reaching too far.' "

McGregor added that chip prices typically fall about 20 percent per year, and chipmakers try to counteract that by rolling out newer products that command higher prices. He said the FTC is "reaching a bit" with its argument that consumers would see better prices as a result of the settlement.

"The FTC is trying to spell out the rules of engagement for the high-tech industry," McGregor said. "This is kind of a warning shot: 'You guys have to play nice.' "

New rules

The antitrust settlement between Intel Corp. and the Federal Trade Commission requires that Intel change its business in several key ways:

. Intel can't cut deals with computer makers in which they're promised benefits or payments if they avoid chips from Intel's rivals, and Intel can't retaliate against computer makers that do business with Intel's rivals.

. Intel must modify its intellectual-property agreements with rivals Advanced Micro Devices, Nvidia and Via Technologies so that those chip makers can more easily do mergers and joint ventures with other companies without the immediate threat of a lawsuit from Intel.

. Intel must now tell customers that its "compilers" — which are used in software development — aren't in fact objective and are biased toward Intel's chips.

. Intel has agreed to maintain a key type of technology in its chips, called a PCI Express bus, in a way that won't degrade the performance of other types of chips that connect to Intel's chips.

FTC hails Intel antitrust settlement a victory for consumers 08/04/10 [Last modified: Wednesday, August 4, 2010 10:00pm]
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