Friday, March 29, 2024

FTC Sues, What’s the Fallout for Intel?

Datamation content and product recommendations are editorially independent. We may make money when you click on links to our partners. Learn More.

The Federal Trade Commission’s lawsuit against Intel isn’t earning a lot of cheers of support, except maybe from nVidia. In fact, analysts think the suit over claims that the world’s biggest chip maker used its market position to stifle competitors is late and pointless.

“This is kind of pathetic. Over two years after Japan, Korea and the EU have taken action and Intel settled with AMD, now the FTC steps up and says something? That’s pathetic,” groused Jim McGregor, chief technology strategist with In-Stat.

Intel’s (NASDAQ: INTC) past behavior certainly earned it considerable scrutiny. In its complaint, the FTC raises issues dating back to 1999. AMD (NYSE: AMD) filed its antitrust case against Intel in 2005. Japanese regulators raided Intel’s offices in 2004 and South Korean officials did the same in 2006.

McGregor said AMD first complained to the FTC but it was the last to act after Japan, Korea, and the European Union, which slapped Intel with a $1.45 billion fine earlier this year after its own multi-year investigation.

“It shows how slow [the FTC] are. To see them to be the last one to act really doesn’t send a good statement about our regulatory bodies,” he said.

The FTC’s slowness isn’t the only problem. It’s also toothless. “If history tells us anything, at the end of the day, most are pretty unsuccessful. Microsoft did not get broken up. IBM did not get broke up. These big cases are generally unsuccessful,” said Scott Testa, professor of Business Administration at Cabrini College in Philadelphia.

McGregor was more blunt. “If I was Intel, I’d take my chances. Let’s face it, the FTC hasn’t taken on anyone seriously since Microsoft in the ’90s and they messed that up royally. They were inept in what they did in handling that case. Now are we going to see the same ineptitude with Intel?”

The adversaries

In its complaint, the FTC says Intel has a monopoly position in the CPU market and would likely gain a similar position in the GPU market. The complaint states “Intel holds a monopoly in the relevant CPU markets and it is likely to obtain a monopoly in the relevant GPU markets.”

That section of the complaint was likely written before Intel shelved the Larrabee GPU project.

With their legal battle settled for now, AMD issued a very mild comment on the Intel investigation. It issued a statement that read “The FTC’s action against Intel is good news for consumers. It is yet another example of regulators around the globe acting to protect consumers by enforcing competition laws.”

nVidia likes what it hears

nVidia (NASDAQ: NVDA) on the other hand released two statements before lunch time on the west coast. The first welcomed the action, while the second comment, posted by CEO Jen-Hsun Huang, is a bit longer and more accusatory:

“We support today’s action by the FTC, which has fully recognized Intel’s behavior as an impediment to progress in the computer industry and to consumer choice.

“As the FTC states, when Intel fell behind in innovation within its core CPU market, it moved to smother competition in the GPU marketplace. This has curbed innovation and investment, and reduced consumer choice.

“The GPU is critical for common applications like graphics, video and photo processing. Today’s filing is sorely needed to stop Intel from using unlawful tactics to lock out the GPU and block consumers from its revolutionary benefits.”

There is certain enmity between the two firms. Lately it’s been over whether nVidia has a license to make Nehalem-generation chipsets. However, it’s still an issue of competition, notes McGregor.

“AMD, despite being behind the 8-ball with their processor technology, are doing quite well with their GPU technology and are even working with Intel with their GPU technology. So what are the FTC looking at?” he said.

While nVidia will be all too happy to help the FTC in the case, AMD has settled its legal beef with Intel and just received the $1.25 billion settlement. However, even if it doesn’t want to testify, it has no choice.

“They may be subpoenaed. They may not have a choice. When you get subpoenaed you don’t say ‘Hey it’s settled, we don’t want to talk about it.’ You go,” said Professor Testa.

Not one-sided

One thing the analysts agree on is that this isn’t a one-sided case where the FTC has Intel dead to rights. “There’s a lot of back and forth. There’s a lot of arguments that can be made on both sides. It’s not a slam dunk for either side,” John Spooner, senior analyst with Technology Business Research, told InternetNews.com.

Intel can argue rightfully that it has competed on technology and that AMD screwed up with Barcelona, which took it a while to get back on track. Certainly no one disputes that part.

“The landscape has definitely changed. They will point to the availability of AMD PCs and servers for sure. That’s something the FTC will possibly take into consideration. But the FTC is more likely to look at where Intel has potentially influenced the numbers of systems out there, not just that they are out there,” said Spooner.

Testa said Intel can’t be timid about such accusations if it wants to compete, nor should it. “At some point in time you have to compete. I don’t think a company should be penalized for being superior. They are an aggressive company and they shouldn’t run their business wrapped around legal ramifications. They should run their business around business ramifications,” he said.

In the end, Spooner doubts this will change much. Intel has already modified some of its co-marketing plans in response to the EU complaints, which is at the center of the FTC complaint.

“It will business as usual tomorrow just like it was business as usual yesterday. I think customers care more about Intel products being stable and priced reasonably than the company being investigated by the government,” he said.

Subscribe to Data Insider

Learn the latest news and best practices about data science, big data analytics, artificial intelligence, data security, and more.

Similar articles

Get the Free Newsletter!

Subscribe to Data Insider for top news, trends & analysis

Latest Articles