FTC: 'Intel fell behind' against AMD, used unfair tactics to catch up

Clearly choosing the path of minimum compromise, the US Federal Trade Commission this morning voted to press antitrust charges against Intel, in an action that now parallels that of the European Commission, as well as the state of New York.

The principal charges are those we've covered here before, and which are also at the root of the EC's case, among them that Intel entered into near-exclusivity or exclusivity arrangements with Dell and Hewlett-Packard. According to the terms of those arrangements (which may or may not be legally considered "agreements" since they apparently were not entirely on paper), the OEMs promised to purchase mainly Intel parts in particular market segments, in exchange for preferential pricing and rebates (or programs that had the same effect as rebates).

But to those charges today, the FTC added an unexpected dose of venom -- a tone completely opposite to that of the Bush-43 era FTC, which at times died down to such a lull it was difficult to tell whether the Commission had dropped its case. At the heart of the FTC's claim today is a broader allegation: that Intel found itself to be technologically inferior to AMD, and that it concluded it could only regain its footing through anti-competitive behavior.

"In 1999 after AMD released its Athlon CPU and again in 2003 after AMD released its Opteron CPU, Intel lost its technological edge in various segments of the CPU markets. Original equipment manufacturers ('OEMs') recognized that AMD's new products had surpassed Intel in terms of performance and quality of the CPU," reads this morning's complaint from the FTC. "Its monopoly threatened, Intel engaged in a number of unfair methods of competition and unfair practices to block or slow the adoption of competitive products and maintain its monopoly to the detriment of consumers. Among those practices were those that punished Intel's own customers -- computer manufacturers -- for using AMD or Via products. Intel also used its market presence and reputation to limit acceptance of AMD or Via products, and used deceptive practices to leave the impression that AMD or Via products did not perform as well as they actually did."

The complaint alleges that Intel entered into deals with Dell, HP, and others as a first-strike response to the technological threat from both AMD and Via, a player whose name has been forgotten in recent years.

But in a completely new set of charges, the FTC is adding fresh allegations that many did not see coming. Among them:

• Intel is currently, actively engaged in manipulating the design of CPUs so as to limit the development of CPU/GPU hybrid technologies to favor Intel's graphics parts. Specifically, the FTC charges Intel with "adopting a new policy of denying interoperability for certain competitive GPUs," and adds that it's protecting its technology by "making misleading statements to industry participants about the readiness of Intel's GPUs." This suggests that the FTC may also have been investigating Intel's conduct with regard to Nvidia, including the skirmish over whether Nvidia was licensed to produce chips for Intel's Nehalem platform.
• Intel is currently, says the FTC, bundling its chipsets with CPUs at below-cost pricing in an effort to drive Nvidia out of the chipset market, "resulting in below-cost pricing of relevant products in circumstances in which Intel was likely to recoup in the future any losses that it suffered as a result of selling relevant products at prices below an appropriate measure of cost," as this morning's complaint alleges.
• Intel intentionally designed the interface between its CPU and chipsets so as to selectively, at a time of its own choosing, exclude Nvidia and ATI (through AMD) from attaining full interoperability with its CPU.
• ADDED 11:08 pm: Intel developed interface standards such as USB and the high-def HDCP connection in such a way that it could take advantage of their specifications before anyone else: "In these instances, Intel encouraged the industry to rely on standards that Intel controlled and represented that the standards would be fairly accessible," states the FTC's complaint. "But Intel has delayed accessibility to the standards for its competitors so that Intel can gain a head start with its own products and wrongfully restrain competition. Intel's conduct has no offsetting, legitimate or sufficient procompetitive efficiencies but instead deters competition and enhances Intel's monopoly power in CPUs."
• The FTC claims Intel intentionally distributed C++ compilers and software libraries whose code would run slower on AMD CPUs than on Intel's. This has been a minor concern of AMD's now-dismissed legal case against Intel, which Intel has continually denied. Nonetheless, Intel did promise to continue not doing this sort of thing, in its settlement last month with AMD.
• Intel published misleading benchmark claims, the FTC alleges -- misleading in that they didn't use real-world representations of performance, and that they were on occasion manipulated. "In truth and in fact, the benchmarks Intel publicized were not accurate or realistic measures of typical computer usage or performance, because they did not simulate 'real world' conditions, and/or overestimated the performance of Intel's product vis-à-vis non-Intel products," the complaint states, going on to use the phrase "false and misleading" to make the publication of tinted benchmarks the equivalent of fraud.
• Intel publishes false and misleading white papers, including this one (PDF available here"), says the FTC: "Intel's Web site includes a White Paper called 'Choosing the Right Client Computing Platform for Public Sector Organizations and Enterprises.' In the document, Intel stated that the 'SYSmark 2007 Preview is a benchmark test that measures the performance of client computing software when executing what is designed to measure real-life activities.' In truth and in fact, the benchmark was not designed to measure 'real life activities,' but to favor Intel's CPUs." SYSmark 2007 Preview is a benchmark produced by Business Applications Performance Corporation, which that firm says was developed in cooperation with both AMD and Intel, among others. Betanews located the offending passage as footnote 1 on page 3.

Next: The FTC's proposed remedies...