All,
Here is the text of the article relating to INTC from today's Business Week:
YOU'RE THE NEXT TARGET, INTEL
When Intel CEO Andrew S. Grove hands over the reins to Craig R. Barrett in May, he may
pass on something Intel had hoped to avoid: a federal antitrust action. BUSINESS WEEK
has learned that as early as June, Federal Trade Commission staffers are aiming to present to
the commissioners a proposed action charging Intel Corp. with illegally using monopoly
power to harm rivals and punish customers who cross the chip giant. The agency is also
probing whether Intel unlawfully uses its chip dominance to muscle into new markets--an
inquiry that could result in a separate action further down the road.
The Intel inquiry has many parallels to the Justice Dept.'s case against Microsoft Corp., the
other half of the ''Wintel'' duopoly that dominates computerdom. As in the Microsoft case,
there will most likely be a quick surgical strike to halt anticompetitive behavior. Meanwhile,
investigators probably will pursue a wide-ranging probe of alleged monopoly abuses. ''You
need to streamline. Otherwise you're heading off into a Vietnam,'' says Stephen Calkins, a
former FTC general counsel who teaches at Wayne State University law school. Intel won't
comment on the potential case. But the investigation differs in one major way from the
Microsoft probe: The FTC isn't under the deadline that the launch of Windows 98 placed on
Justice. So FTC lawyers are taking their time to ensure they have enough evidence to build
a strong case.
Sources familiar with the FTC's investigation say it is initially zeroing in on charges that
Intel retaliated against two customers that sued the company in patent disputes. After the
companies--Digital Equipment Corp. and Intergraph Corp.--filed separate suits, Intel cut off
chip supplies and technical information. That didn't sit well with U.S. District Judge Edwin L.
Nelson, who on Apr. 10 slapped an injunction on Intel to stop such behavior toward
Intergraph. Industry executives say the FTC probe is looking at how Intel uses such
intellectual-property ''blackmail'' to keep customers in line.
PRIX FIXE? The FTC also is sifting through complaints that Intel discourages computer
makers who buy processors from rivals. The company's most obvious weapon here is the
famous Intel Inside marketing program. The chipmaker paid out an estimated $1 billion in
rebates last year to PC companies that use Intel chips exclusively. Rivals call this practice
exclusive dealing and charge that it freezes out competitive products and allows price-fixing.
Industry execs who have worked with the FTC say it is also taking a careful look at Intel's
growing control over the basic design of PCs. Parts of the PC that used to be based on
''open'' standards are increasingly getting superceded by Intel technologies, which the
chipmaker usually has licensed for free to all comers. But details about the latest innovation,
the patented connector used in the Pentium II, are being kept secret. That could shut out
rivals like Advanced Micro Devices Inc. and National Semiconductor Corp. if, as expected,
motherboards designed for Pentium IIs become ubiquitous in PCs.
Another FTC concern: efforts by Intel to leverage its processor monopoly into other chip
markets. Intel's share in chipsets--the companion chips that work with the
microprocessor--shot from 8% in 1993 to more than 75% last year, while rivals such as VLSI
Technology Inc. were driven out. Now, Intel is moving into graphics and networking chips.
Industry execs says Intel can force PC makers to buy these other chips by bundling them
with processors on Intel motherboards. The FTC might label that monopoly leveraging.
If the FTC decides to go ahead and pursue Intel, how will it fare? The agency isn't pushing
any far-out legal principles, and it has had a good track record lately with actions such as its
blocking of the Staples-Office Depot merger. Indeed, competitors claim its case may be
stronger than Justice's Microsoft action. That's not exactly the sort of kickoff that Intel's
Barrett was anticipating.
By Andy Reinhardt in New York and Susan B. Garland in Washington |
