Windsock and Intel investors - An interesting article about Intel and anti-trust matters. Of most interest is one of the authors, David B. Yoffie. Is this the same David B. Yoffie who sits on Intel's board?
taipeitimes.com
Playing by the rules: How Intel escapes grip of antitrust litigation
Rather than wait for antitrust problems to develop, Intel's president has made certain to do everything in his power to ensure that the issue would never arise
By David B. Yoffie and Mary Kwak
NY TIMES NEWS SERVICE
NEW YORK
"Antitrust litigation:" Those can be frightening words for executives at some of the world's biggest companies.
Take the computer industry. For years now, Microsoft has been mired in court, facing charges of predatory behavior by the US Department of Justice and the attorneys general of more than a dozen states. It has seen its name and business practices dragged through the mud and its very future as a single company thrown into doubt.
Intel, in stark contrast, has managed to avoid prolonged, high-profile antitrust cases. It's remained above the fray, its business focus largely undisturbed by trustbusters.
Why? Because of Intel's antitrust compliance program, which is an integral element in the chip maker's business strategy. In an age increasingly characterized by global markets that are dominated by a few huge companies, Intel's approach to compliance provides a valuable model for any enterprise that may come under regulators' scrutiny.
Very early in its history, Intel came to understand the need to play by the rules. An innovator in memory chips and microprocessors, the company became a success soon after it was founded in 1968. But in the mid-1980s, its growth began to accelerate rapidly, thanks largely to the success of its latest microprocessor, the 386.
As the company expanded at a faster clip, CEO Andy Grove became increasingly focused on avoiding a major antitrust suit. He did not want to endure a fate like AT&T's, which had recently been broken into pieces by the courts. So he decided to go on the offensive.
Rather than wait for antitrust problems to develop, Intel would do everything in its power to ensure that the issue would never arise. The company set its sights on developing what its general counsel, Tom Dunlap, refers to as "the world's best antitrust compliance program."
After talking with Dunlap about antitrust law, Grove came to appreciate that the line separating acceptable from unacceptable conduct was not clear-cut. There were substantial gray areas. "So," he says, "I suggested we put a `guard band' on the safe side of the conduct line."
A guard band, in engineering parlance, is a margin of safety: It is the difference between, for example, a stated specification and the higher level of performance that Intel actually requires. In the antitrust context, it became shorthand for compliance standards that were more conservative than the company's literal reading of the law.
Developing "new specs for sales conduct, business conduct and business practices," as Grove puts it, was the easy part. The real challenge lay in communicating senior management's commitment throughout the ranks.
Intel began by instituting live training for all affected employees. The curriculum covered several basic dos and don'ts: no price fixing, no exclusive contracts where microprocessors were concerned, no talking with competitors about product and pricing strategies, and so on. But it also addressed the gray areas, such as technical cooperation and tied sales, that were most likely to trip people up. This was followed by customized training programs for different parts of the company.
But the company didn't rely on lectures and workshops alone. Beginning in the 1990s, Intel's legal department carried out random audits of employees' files. Lawyers would swoop in and seize a manager's papers, disks and e-mail, taking all the documents and files that might be demanded by the Federal Trade Commission or Justice department.
The audits began at the top of the organization chart and fanned out through the company. If any irregularities were found, the legal department investigated the source, imposed a remedy and updated its training to prevent similar problems from emerging again.
The most powerful weapon in the legal team's arsenal was the mock deposition. Following a raid on a senior executive and his unit, Dunlap would then hire an antitrust litigator to cross-examine the manager in front of the entire executive staff, using confiscated materials to fuel the legal attack.
After an hour of intensive questioning, the outside attorney would spend additional time discussing key lessons and answering questions from the often shaken audience.
"It's fascinating to see," Grove says. "A memo is introduced into evidence and you shrug. You fully understand how that memo could be written. Moreover, you could have written it yourself. And then you see that memo turned into a tool and a weapon against you, in front of your eyes."
Despite Grove and Dunlap's best efforts, Intel has not been entirely immune to investigation. The EU Commission recently initiated an investigation; and the FTC looked into Intel's activities twice in the 1990s, closing each review without further action.
With the exception of a narrow consent decree signed in 1999 regarding how Intel uses its intellectual property, the company has avoided the long legal entanglements that have plagued other powerful companies.
"Since antitrust is embedded in everything we do," Grove says, "we can control our destiny." |
