A WORLD OF PROBES INTO INTEL

[Anonymous]

A World of Probes into Intel 
Add South Korea to the list of countries
investigating the chip giant’s business practices. 

Be careful what you
wish for. After Intel spent billions over past decade to make its brands one of
the best known in the world, it’s beginning to look like there’s no place the
giant chipmaker can escape scrutiny.

 

The Santa Clara (Calif.) company disclosed in a regulatory filing on Aug. 8
that the South Korean Fair Trade Commission is looking into its rebate and
marketing practices, joining similar investigations in Japan and the European
Commission. Investigators around the globe are probing claims that Intel has
abused its dominant market share in microprocessors to force customers into
exclusive contracts that may have illegally shut out rival Advanced Micro
Devices . AMD is suing Intel in the U.S. and Japan.

 

For Intel, the question now is how hot can the hot seat get? The increasing
international scrutiny could prompt the eerily silent Federal Trade Commission
to launch its own investigation. Sources say U.S. investigators have been
following the actions taken around the world but haven’t yet opened a formal
inquiry of their own.

 

COORDINATED RAIDS. AMD also is trying to get state officials to take an
interest in Intel’s business practices. The smaller chipmaker has been quietly
laying out its case before state regulators who filed antitrust claims against
Microsoft years ago. Massachusetts, Texas, New York, and Connecticut spearheaded
the initial investigation against Microsoft. It’s not clear whether any are
considering action against Intel.

 

Intel says it’s complying with a Korean request for documents relating to
its practices. The request came in June, just a few weeks before teams of
investigators from the European Commission’s competition directorate on July 12
carried out a series of coordinated raids across at least four countries on
Intel’s European offices and those of a half-dozen PC makers and distributors.

 

In March, Japan’s Fair Trade Commission found that Intel violated fair
competition laws there by restricting the amount of business its customers could
do with AMD. Intel in April accepted the ruling and agreed to change some of its
practices but didn’t admit to any wrongdoing. Japanese regulators say they’ll
continue to monitor interactions between Intel and PC makers to ensure
compliance.

 

“FAIR AND LAWFUL.” Intel has faced the scrutiny of U.S. regulators before.
The FTC closed a three-year investigation into Intel’s business practices both
in 1993 and in 2000 without taking action. A call for comment to the FTC’s
Bureau of Competition wasn’t returned.

 

Intel says it hasn’t heard of any U.S. probes into its practices. “Twice,
once in 1993 and then in 2000, [regulators] found nothing to pursue,” says
spokesman Chuck Mulloy. “I wouldn’t want to speak for them today, other than to
say we think our business practices are fair and lawful.”

 

AMD spokesman Dave Kroll declined to comment on the status of any potential
FTC investigation. “The FTC has been and is supportive of fair competition in
the processor sector and is monitoring the situation closely,” Kroll says.

 

MAKING ITS CASE. Legal pundits say U.S. regulators are unlikely to act
anytime soon, despite the increasing pressure Intel faces overseas. Domestic
officials, they point out, typically wage battles against monopoly abuse only if
they can demonstrate that consumers were harmed by the alleged behavior.

 

Still, that doesn’t mean Intel is safe. AMD’s lawyers have been meeting
with state regulators to try to convince them to take on the case. Several state
agencies could launch their own investigations in the next few months. The
states that could be interested in the Intel case include New York, New Jersey,
Missouri, and California. AMD plans to share any potential “smoking gun”
documents it finds with federal, state and overseas regulators ahead of its own
antitrust trial likely next year in Delaware. And it has subpoenaed e-mails
between Intel and PC makers.

 

The European case, however, may come to head long before any of those
scenarios. Since European antitrust law gives more consideration to the impact
of monopolistic behavior on competitors than U.S. law does, it’s widely believed
the EC will bring a case against Intel as early as October.

 

CAUGHT FLATFOOTED. The EC launched its first inquiry into Intel’s practices
in 2000 at the behest of AMD. The probe heated up again in 2004 after AMD filed
another complaint and provided additional evidence of what it says has been a
ceaseless campaign to harm its business instead of competing fairly.

 

The trouble couldn’t come at a worse time for Intel. The chipmaker has been
caught flatfooted by the success of AMD’s Opteron server chip in particular and
by the growing strength of AMD’s desktop and notebook offerings. AMD’s elegantly
designed dual-core chips and surrounding architecture have become a hit with
customers. Server makers Hewlett-Packard, Sun, and IBM , among others,
increasingly are rolling out new products with AMD inside

 

Intel remains resolute. Chief Executive Paul Otellini says the chipmaker is
confident things will be “resolved favorably to Intel.” With so many things
piling up against it, though, if Intel execs weren’t worried before, they should
be now.

[Author]

August 12, 2005 at 10:50 AM