In filing suit against Intel Corporation today, the Federal Trade Commission will test the limits of its authority to enforce antitrust laws, observers say.
It’s a “very ambitious case,” that will “explore the contours” of antitrust laws, said Kenneth Glazer, who previously served as deputy director in the FTC’s competition bureau and is a partner at K&L Gates.
The agency today accused the chip giant of waging “a systematic campaign to shut out rivals” by “cutting off their access to the marketplace.”
The suit comes on the heels of several important developments in the long-running Intel case. In the last year, the company agreed to a $1.25 billion settlement with rival chip maker Advanced Micro Devices, Inc., was hit with a $1.45 billion fine from the European Union, and was targeted in a separate lawsuit filed by New York State Attorney General Andrew Cuomo.
In the past, Intel has been accused of of illegally inducing its customers to spurn AMD’s products.
The FTC’s case goes further. It says that Intel engaged in anti-competitive behavior in a separate market for chips, known as graphics processing units, that are made for heavy multimedia use. It also alleges deceptive marketing practices that raise consumer protection concerns. Previous litigation has largely focused on antitrust violations.
After what two commissioners called an “unprecedented” four meetings, the commission voted yesterday to unanimously file suit.
Commissioner William E. Kovacic was recused from the matter because his wife’s firm, Jones Day, represents Intel competitor, Nvidia, which makes the multimedia chips and lobbied the FTC to bring the suit.
In a statement, Intel accused the commission of adding “last minute” allegations the FTC had not properly investigated, and demanding an “unprecedented” set of remedies.
“This case could have, and should have, been settled,” said the company’s general counsel, Douglas Melamed, who served as acting antitrust chief in the Clinton Justice Department. Melamed joined Intel last month after the AMD settlement.
The FTC’s wide-ranging complaint covers conduct stretching back a decade. The agency brought its case under multiple authorities, some of which have rarely been tested by courts.
The FTC usually brings monopolization cases indirectly through the Sherman Act, which governs the Justice Department’s antitrust cases. But the FTC can also bring antitrust cases through its own authority, under the Federal Trade Commission Act. Section 5 of that statute prohibits broader “unfair methods of competition.”
Recent cases the FTC has brought under its Section 5 authority, including a 2005 cases against Negotiated Data Solutions, have resulted in settlements and were not tested by judicial scrutiny.
In its case against Intel, the FTC tried both approaches.
“What they are doing is hedging their bets,” said Robert Litan, a former deputy in the Antitrust Division during the Clinton administration, where he supervised the first Microsoft investigation. “Section 5 is a safety net and catch-all. [The case] is designed to set precedent and see if it sticks.”
The 24-page complaint includes nearly five pages of proposed remedies to change Intel’s conduct.
Chairman Jon Leibowitz and Commissioner J. Thomas Rosch alleged in a statement that Intel “fell behind in the race for technological superiority,” and resorted to “deception and coercion” to catch up with AMD and other innovators.
“Intel has engaged in a deliberate campaign to hamstring competitive threats to its monopoly,” said Richard A. Feinstein, who heads the FTC’s competition bureau. “It’s been running roughshod over the principles of fair play and the laws protecting competition on the merits.
The complaint is filed not in federal court but through an administrative process within the commission. The FTC recently announced new rules for the commission to expedite cases, after coming under fire for letting matters drag on for years. A trial, which will test the commissions new procedures, is slated for next September.
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