FTC Sues Intel

On December 16, 2009, the Federal Trade Commission (“FTC”) filed an administrative complaint against Intel Corporation (“Intel”) alleging that it has engaged in anticompetitive and unfair conduct in order to stifle competition and maintain its monopoly position.

In the complaint, the FTC alleges a number of unfair methods of competition in violation of Section 5 of the FTC Act. The FTC alleges that when its monopoly was threatened, Intel resorted to “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.” Some of the alleged conduct dating back to 1999 include: entering into anticompetitive arrangements with the largest computer manufacturers that were designed to limit or foreclose various original equipment manufacturers’ (“OEMs”) use of competitors’ products; punishing OEMs who did not purchase “enough” of Intel’s products by threatening to increase (and actually increasing) prices, ending product and technology collaborations, shutting off supply, and reducing marketing support, while favoring OEMs that purchased all or nearly all of their requirements from Intel; offering market share or volume discounts to selective OEMs in an attempt to foreclose competition in the relevant central processing unit (“CPU”) markets; using its position in complementary markets to protect against competitive threats in the relevant CPU markets; inducing suppliers of complementary software and hardware products to eliminate or limit their support of non-Intel CPU products; failing to disclose material information to consumers about the effects of Intel’s redesigned software on the performance of non-Intel CPUs; and pressuring independent software vendors to label their products as compatible with Intel products only, even though competing microprocessor products were compatible as well.

The FTC action is noteworthy because the Commission is attempting to invoke its full authority under Section 5 of the Federal Trade Commission Act (“FTC Act”) to pursue anticompetitive conduct. Companies are now on notice that the FTC is willing to exercise its full authority under the broader Section 5 to reach conduct that the Sherman Act may not reach. In a joint statement from Chairman Leibowitz and Commissioner Rosch, they noted that because the courts have limited the reach of antitrust laws giving some anticompetitive conduct a free pass, it is more important than ever for the Commission to actively consider whether it may be appropriate to exercise its full authority under Section 5. While the FTC is clearly broading its authority, Leibowitz and Rosch also made clear that the FTC will enforce Section 5 responsibly as Section 5 is not without boundaries. That being said, the filing of this case demonstrates that the FTC is willing to aggressively go after companies for anticompetitive behavior that may not be reached by the antitrust laws.

Andre Barlow
(202) 589-1834
abarlow@dbmlawgroup.com