The US Federal Trade Commission (FTC) yesterday voted three to one to issue an antitrust complaint against Intel alleging the chip giant withheld vital technology information from three vendors that also are competitors, and is using its monopoly power to "cement its dominance over the microprocessor market".
The complaint will lead to a trial by an administrative law judge, according to the FTC. The judge works for the FTC, but acts independently. The commission is asking for a "notice of contemplated relief" which would prevent Intel from continuing to engage in the conduct described in the complaint.
When Digital, Intergraph and Compaq sought to enforce important microprocessor patents they hold against Intel or other computer companies who buy Intel products, Intel retaliated by cutting those three vendors off from necessary technical information and also threatened to cut off their supply of microprocessors, alleged William Baer, director of the FTC Bureau of Competition.
Intel microprocessors account for about 80 per cent of the total worldwide dollar sales in the general chip market, according to the company's internal figures. Intel has used that position to shut out customers with whom Intel also competes, the FTC alleges.
Intel promotes and markets its microprocessors by giving customers advance technical information before chips are released commercially. That way, PC makers can be ready to release new machines at the same time Intel releases new chips, or soon thereafter. Intel subjects its customers to non-disclosure agreements as part of the deal.
The arrangement creates a "mutually beneficial relationship" between Intel and computer vendors, but Intel has reneged on its part of the deal as a form of retaliation against Intergraph, Digital and Compaq, the FTC alleges.
A lawsuit filed by workstation maker Intergraph, which alleges that Intel used coercive tactics to obtain rights to Intergraph's microprocessor patents for free, is a key to the FTC case. A federal judge granted a preliminary injunction in the case in April, ordering Intel to provide advance product information and technical support. Intergraph contends that Intel used access to non-disclosure agreements and contracts to coerce Intergraph to give up patent licenses.
Intel has engaged in similar tactics with both Digital and Compaq, Baer said. "Intel sought to deliberately injure these three companies," he added.
The FTC lawsuit is in "no way an attack on Intel's ability to defend its own intellectual property," Baer said. "What it cannot do, the thing we object to and that we believe violates the antitrust law is to use extra-judicial self help" to lock out competition.
Intel went to existing customers "in a selected, targeted fashion" with the intent of withholding critical information those vendors needed in order to do business, according to the FTC. In the case of Intergraph, for instance, Intel cut the vendor off from information needed to figure out how to make Intel's chips work in Intergraph's workstations. The chip giant engaged in similar shenanigans with both Digital and Compaq, which has been Intel's largest vendor customer, the FTC said.
With Digital, Intel demanded prototype information on its Alpha chip technology then "warned customers of Digital not to work with Digital", Baer said.
In the case involving Compaq, the FTC said that in November 1994, Compaq sued Packard Bell Electronics (now Packard Bell NEC) for violating Compaq patents in Packard Bell motherboards. Intel, which supplied the motherboards, allegedly intervened on Packard Bell's behalf, and in response to Compaq's assertion of its intellectual property rights, Intel cut off technical information that Compaq needed, according to the FTC. Intel restored Compaq's access to technical information only after Compaq agreed to cross-license its patents with Intel, the agency said.