The Federal Trade Commission has charged that Intel Corp., the world’s largest maker of computer chips, “used its monopoly power to cement its dominance” over that market by impeding innovation and stifling competition.
There are two problems with this argument:
– Intel’s “dominance” may be short-lived precisely because of the innovation of competitors. True, Intel now dominates those high-end microprocessors that are essential for expensive personal computers that do everything. But the growth recently has come at the low end, those chips that go into computers costing $1,000 and less. Intel has had its lunch handed to it in this market by such scrappy competitors as Cyrix and Advanced Micro Devices.
– The FTC is going to have a hard time proving that competition was stifled. Its own complaint is narrowly based on intellectual property lawsuits against Intel by three companies, two of whom–Compaq Computer Corp. and Intergraph Corp.–were customers but not competitors of Intel.
The FTC charged in the administrative complaint that Intel refused essential technical information to Digital Equipment Corp., Compaq and Intergraph to “punish them for refusing to license key patents on Intel’s terms.” The complaint will first be heard by an FTC administrative law judge, whose ruling could then be appealed to the full FTC and on to the appellate court, a process that could take years.
Intel acknowledges that the freeze-out amounted to putting “speed bumps” in the paths of these companies, but argues that it was legitimately within its rights to deny intellectual property in the form of confidential product information to them once they had sued Intel over patents.
In targeting a high-profile, high-tech company with antitrust violations, the FTC joins the Justice Department, which has already sued Microsoft for anti-competitive behavior. Intel’s chips and Microsoft’s Windows are the duo that make up the “Wintel” that has defined the desktop PC.
The cases are different in scope and type; both are ill-advised. But the FTC carries the more difficult burden because, in the absence of apparent evidence, it must prove that competition in the market has been harmed.
Intel claims the FTC, in wading into the arcane arena of patent disputes with this complaint, is trying to “assert a new theory under antitrust law.” Intel is right.
