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Intel Probe Reflects Government's Unease

September 26, 1997| From Washington Post

The latest federal antitrust investigation of Intel Corp., which has been going on quietly for several months, opens what may prove a difficult new chapter in the government's uneasy relationship with the nation's giant technology companies.

The basic issue is whether the innovation and marketing muscle that made these companies global leaders is now overwhelming smaller competitors.

Intel is facing a wide-ranging antitrust investigation by the Federal Trade Commission, which is exploring whether the nation's leading maker of computer chips has unfairly used its dominance to thwart competition.

The Clinton administration has been trying to work with high-tech companies, even to the point of sponsoring an industry "summit" at the White House this summer. But some officials also express uneasiness that some of the leaders in the high-technology world, starting with dominant players such as Santa Clara-based Intel and Microsoft Corp. of Redmond, Wash., are using their wealth and influence to gain unfair advantages in new markets.

"While big isn't bad, you can't use monopoly power to engage in exclusionary acts or foreclosures, namely shutting people out of a business," said Kevin Arquit, a lawyer with Rogers & Wells in Washington and former director of the FTC's Bureau of Competition.

According to industry sources, the investigation of Intel is a sweeping look at how the chip maker is maintaining its share of the market for microprocessors and--perhaps even more important--expanding into new areas.

Intel makes about 85% of the computer logic chips that serve as the brains of personal computers.

In the last few years, it has also begun to build many of the other components that make up the inside of a PC.

Howard High, a spokesman for Intel, said the company is cooperating fully with investigators and is confident that the probe will not turn up any evidence of inappropriate actions. The company has been investigated before, he said, citing a two-year FTC investigation of Intel's business practices that ended in mid-1993 when the agency informed Intel that it had found no evidence of wrongdoing.

But both Intel and the high-tech industry are different now, pointed out Nathan Brookwood, an analyst with Dataquest Inc., a market research group in San Jose. "Last time, Intel had a dominant hold on the microprocessor, but the rest of the PC architecture was still as it had been defined by IBM in the 1980s," Brookwood said.

That has changed. Although Intel still builds microprocessors, it has also become one of the dominant manufacturers of motherboards, the PC's equivalent of the central nervous system, as well as chip sets, or collections of chips that work together to carry out a special task, such as displaying graphics or sound.

Shares of Intel fell $2.50 to close at $93.13 on Nasdaq.

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