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Intel Abused Its Power, FTC Says

Antitrust: Government outlines its case against the chip maker, which denies it holds a monopoly. Trial starts next week.

March 02, 1999| From Times Wire Services

WASHINGTON — The federal government Monday laid out its charges against leading computer chip maker Intel Corp. just ahead of the start of the second big antitrust case against a high-tech industry leader.

Intel, the dominant maker of microprocessors that are the "brains" inside personal computers, rejected the charges in a reply brief, denying that it had sought to quash competition improperly.

The administrative trial opens next Tuesday--less than two weeks after the antitrust case against leading software maker Microsoft Corp. entered a lengthy recess. The hearings are expected to last six to 10 weeks.

The Federal Trade Commission, in a 50-page filing, outlined its view of Intel's rise, arguing that the company had abused monopoly power and bullied three of its customers to maintain a stranglehold on the market.

"Simply competing on the merits was insufficient for Intel," the FTC said. "The company instead chose to exploit its monopoly to gain access to the innovative technologies of others in order to maintain its market dominance."

Intel, in a pretrial brief, quoted the government's chief economics expert to support its claim it doesn't have a monopoly in the market for microprocessors and therefore cannot dictate prices or control the pace of innovation. The company also quoted executives of Compaq Computer Corp., one of the alleged victims of Intel's conduct, as disputing key elements of the FTC's case.

The FTC accuses Intel of forcing customers to disclose valuable technical data to illegally protect a monopoly in the microprocessor market and squelch potential competitors. Besides Compaq, the FTC said targets of Intel's tactics are Digital Equipment Corp., now owned by Compaq, and Intergraph Corp.

"By gaining access to potentially competitive technology, Intel substantially reduced the threat it would be displaced by a competitor offering a product with superior price and performance characteristics," the FTC's Bureau of Competition said in it's pretrial brief. By enforcing a "compulsory licensing regime, Intel created disincentives for innovation."

Intel, however, quoted Frederic Scherer, the FTC's economics expert, as testifying in a sworn deposition that industry innovation had not been seriously affected by Intel's business practices.

"It is unthinkable that a company could stand still in this kind of industry under any circumstances," Scherer is quoted as saying. He described the rate of innovation in microprocessing as "one of the fastest treadmills I've seen."

For more than a decade, Intel has been the dominant supplier of processors for personal computers, collecting more than 80% of the revenues and billions in profits.

But since the FTC complaint was filed last year, chip competitors Advanced Micro Devices Inc. and National Semiconductor Corp.'s Cyrix unit have made great strides in stealing business from Intel in popular low-end computers costing less than $1,000.

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