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Intel deal with FTC comes with little pain
July 19, 2010 / 6:05 PM / 7 years ago

Intel deal with FTC comes with little pain

WASHINGTON (Reuters) - The preliminary deal between Intel Corp, which just reported stellar quarterly earnings, and federal antitrust enforcers gives the world’s top chip maker less marketing leeway, but does not cost it any money.

<p>A shadow is cast on an Intel advertisement at the Computex 2010 computer fair in Taipei June 1, 2010. REUTERS/Pichi Chuang</p>

Intel’s deal with the U.S. Federal Trade Commission imposed no monetary penalties, but it will require the chip maker to extend changes under its November settlement with Advanced Micro Devices Inc to graphics chips, according to a source close to the agency.

The deal -- which has been in the works for months, but with no disclosure of terms -- will also regulate Intel’s use of volume discounts for both central processing unit and graphics chips, the source said, speaking anonymously because the deal has not been finalized.

Intel shares ended the day 57 cents higher at $21.59 on the Nasdaq.

Intel has been under attack from rival chip makers for years for its aggressive pricing and sales tactics. It makes 80 percent of the world’s CPUs, the brains of personal computers.

While FTC and Intel lawyers reached a preliminary consent agreement on June 21 and halted litigation, the five-member commission continues to discuss it.

Friday is the target date for a final decision, although that date could be pushed back or, as with any deal, it could fall apart altogether.

“Discussions are ongoing and we have nothing more to add at this point,” said Intel spokesman Chuck Mulloy.

The company has denied any wrongdoing.

The FTC had no comment for this story.

Patrick Wang, an analyst with Wedbush Securities, said the preliminary settlement would not significantly alter the chip landscape or Intel’s ability to command market share.

But Wang noted that AMD had already seen some additional sales since its settlement with Intel.

“It’s going to be more of an impact mid- to longer term,” he said.

While resolving other antitrust challenges has cost Intel huge sums of money, the FTC does not fine companies except in the case of settlement violations.

Urged on by Intel archrival AMD and graphics chipmaker Nvidia Corp, the FTC in December accused the company of illegally using its market dominance to stifle competition.

In its complaint, the FTC said Intel had been trying to shut out competitors in maneuvers that date back to 1999 -- the same year the agency settled a previous antitrust fight with the company.

AMD settled for $1.25 billion in November. The deal requires Intel to refrain from rewarding computer makers for buying only its chips, for reducing its purchases of AMD chips or for refusing to advertise that their computers contained AMD chips. Intel is also barred from designing chips so they work slower when paired with AMD products.

With AMD out of the fight, Nvidia has pressed on, calling for scrutiny of Intel’s graphics processing units, which are often used in mobile phones, personal computers and game consoles.

If the commission accepts the deal, it will be put out for public comment, but there is little chance the comments would lead to substantial changes.

A wide range of antitrust enforcers have gone up against Intel for its controversial pricing incentives.

New York Attorney General Andrew Cuomo accused Intel in November of threatening computer makers and paying billions of dollars of kickbacks to maintain market supremacy.

The European Commission has fined Intel 1.06 billion euros ($1.44 billion) for illegally shutting out AMD.

In June 2008, South Korea fined Intel some $26 million, finding it offered rebates to PC makers in return for not buying microprocessors made by AMD.

Japan’s trade commission concluded in 2005 that Intel had violated the country’s anti-monopoly act.

The case before the FTC is “In the Matter of Intel Corporation,” docket number 9341.

Reporting by Diane Bartz; editing by Lisa Von Ahn and Andre Grenon

Our Standards:The Thomson Reuters Trust Principles.
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