FTC Brings Administrative Action Against Intel

(June 9, 1998)  The Federal Trade Commission filed its long anticipated but weakly grounded administrative action against Intel Corp. on Monday.  The Complaint alleges that Intel is a monopoly that illegally refused to deal with computer makers Compaq, Intergraph, and DEC in order to coerce them into surrendering certain intellectual property rights.  The FTC seeks a "cease and desist" order.

Intel intends to fight the action. "For years Intel has shared its intellectual property and early samples of its products with a number of key customers. These customers work with Intel to develop products for the market on a mutually beneficial basis. We believe the ultimate beneficiaries of this approach have been consumers because they get the latest technology and best products as soon as possible. At the same time, for more than 10 years, Intel has taken unprecedented steps to ensure that all of our activities and policies are in full compliance with existing law," said F. Thomas Dunlap, Intel VP and General Counsel in a press release. "The Commission’s decision today signals that they want to change the very laws upon which we’ve based our policies."

The Federal Trade Commission Complaint alleges that "Intel has monopoly power in the market for general-purpose microprocessors."  (¶ 6.)

The Complaint also alleges that Intel engages in "denying or threatening to deny technical information about Intel microprocessor products to Intel customers who have developed and patented innovations in microprocessor technology, as a means of coercing those customers into licensing their innovations to Intel." (¶ 11.)

Specifically, the Complaint alleges that Intel's refusals to deal affected three companies, Intergraph, DEC, and Compaq.

The Complaint further alleges that such conduct constitutes "unlawful monopolization, unlawful attempts to monopolize, and unfair methods of competition, all in violation of Section 5 of the Federal Trade Commission Act."  (¶ 42.)

The Complaint requests that Intel be ordered to cease and desist from discriminating or threatening to discriminate against anyone in the sale of its microprocessors, in nondisclosure agreements concerning microprocessors, in providing information, in providing prototypes, or in providing technical assistance, unless it can demonstrate that such action is based on legitimate business considerations.

Intel has already been sued by Intergraph on federal antitrust and other grounds for these same practices.  Intergraph is a Huntsville, Alabama, maker of computer workstations designed for sophisticated graphics applications such as computer-aided design, computer-aided engineering, computer-aided manufacturing, and computer-aided animation.  A federal judge in Alabama has already issued a preliminary injunction against Intel.  Intel has appealed.

Intergraph Corporation made the following statement in response to the FTC's action:

"As a company which has been harmed to the point of having to sue Intel Corporation, Intergraph certainly understands the circumstances which prompted the U.S. Federal Trade Commission to also file suit against Intel. It is reassuring that FTC investigators apparently believe our concerns reflect a broad threat to the computer industry. However, our lawsuit stands on its own and is the first time, as far as we know, that Intel has been accused of abusive behavior, antitrust violations, and patent infringement all in one suit. We expect to win our case, either through trial or settlement, regardless of the FTC’s actions. The federal court’s 80-page preliminary injunction against Intel found that Intergraph has a "substantial likelihood" of proving one or more of its claims, including an antitrust claim against Intel."

Intel has 20 days to file a response.  A hearing will be held before an Administrative Law Judge of the FTC on July 10 at 10:00 am..

The decision by the Commission was not unanimous.  FTC Commissioner Orson Swindle dissented on the grounds that he "did not find reason to believe that Intel has violated the law."