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The US Federal Trade Commission (FTC) sued Intel Corp. on Wednesday, accusing the world's biggest computer chipmaker of illegally using its market power to stifle competition.
The FTC alleged that Intel, which has been facing similar charges in Europe and Asia, has waged a systematic campaign for a decade to shut out competing microchips produced by rivals by cutting off their access to the marketplace. "Intel has engaged in a deliberate campaign to hamstring competitive threats to its monopoly," said Richard Feinstein, director of the FTC's Bureau of Competition. "It's been running roughshod over the principles of fair play and the laws protecting competition on the merits.
"The Commission's action today seeks to remedy the damage that Intel has done to competition, innovation, and, ultimately, the American consumer," he said.
The FTC suit comes a month after Intel agreed to pay Advanced Micro Devices 1.25 billion dollars to settle the long-running legal dispute between the two chipmakers on antitrust and patent issues. In exchange, AMD agreed to drop all pending litigation against Intel.
The attorney general of New York state filed an antitrust lawsuit against Intel in November alleging the chip giant had engaged in illegal practices to dominate the market.
Intel, which produces some 80 percent of the microprocessors used in the world's personal computers, dismissed the FTC suit as "misguided" and said it has competed "fairly and lawfully."
Intel senior vice president and general counsel Doug Melamed said settlement talks stalled when the FTC "insisted on unprecedented remedies" that would have made it "impossible for Intel to conduct business."
"The FTC's rush to file this case will cost taxpayers tens of millions of dollars to litigate issues that the FTC has not fully investigated," he said.
The FTC is seeking an order from an FTC administrative law judge that would prevent Intel from "using threats, bundled prices, or other offers to encourage exclusive deals, hamper competition, or unfairly manipulate (chip) prices."
Feinstein said the case was tentatively scheduled to be heard on September 8, 2010 and could go before the full slate of FTC commissioners in 2011. Intel could then appeal to a US court of appeals.
Feinstein stressed that the FTC has "no goal of breaking up Intel."
"The remedy that the FTC is seeking does not include a monetary penalty," he said. "We are really more focused on addressing the conduct and restoring robust competition going forward."
The FTC said Intel's anticompetitive tactics were designed to put the brakes on superior rival products that threatened its monopoly in the market for central processing unit (CPU) microchips, the "brains" of computers.
"Over the last decade, this strategy has succeeded in maintaining the Intel monopoly at the expense of consumers," the FTC statement said.
The FTC accused Intel of using "threats and rewards" with major computer makers such as Dell, Hewlett-Packard and IBM to coerce them not to buy chips produced by rival companies.
Intel also allegedly "secretly redesigned key software, known as a compiler, in a way that deliberately stunted the performance of competitors’ CPU chips," the FTC said.
The FTC said Intel has found itself falling behind in the growing market for graphics processing units (GPUs) to companies such as Nvidia and has responded by "embarking on a similar anticompetitive strategy."
There is a "dangerous probability that Intel's unfair methods of competition could allow it to extend its monopoly into the GPU chip markets," the FTC said.
Nvidia welcomed the FTC's suit. "We applaud today's action by the US Federal Trade Commission," it said. "We are particularly pleased to see scrutiny being placed on Intel’s behavior toward GPUs, which have become an increasingly important part of the PC industry."
European Union antitrust regulators fined Intel a record 1.45 billion dollars in May, claiming it abused its stranglehold on the semiconductor market to crush AMD.
Intel denied the charges and has appealed the EU ruling.
Intel last year also challenged an 18-million-dollar fine imposed by South Korea's antitrust watchdog.
Intel shares were trading 1.92 percent lower in New York at mid-day at 19.42 dollars. AMD was up 5.05 percent to 9.27 dollars while Nvidia gained 7.16 percent to 16.77 dollars.
