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Intel claims FTC found no evidence of harm

March 2, 1999
Web posted at: 8:21 a.m. EDT (0821 GMT)

by James Niccolai

(IDG) -- In a court document filed last week, Intel Corp. said the U.S. Federal Trade Commission found no evidence that the company's conduct led to reduced competition or innovation in the markets for microprocessors or related products.

Intel cited testimony from the FTC's own economics expert, Frederic Scherer, who apparently acknowledged during pretrial questioning from Intel lawyers that he found "no direct evidence" that Intel's actions harmed innovation or price competition in the PC chip business.

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Intel said other deposition testimony and pretrial statements from senior staff at IBM, Compaq Computer Corp., Motorola Inc., Sun Microsystems Inc., Hewlett-Packard Co. and others show that research and development of new PC chip technologies wasn't affected by Intel's conduct described in the FTC's complaint.

Intel's pretrial brief cited only selected portions of the witnesses' depositions, which were filed under seal with the court. The FTC filed its own pretrial brief last week -- which wasn't immediately made available -- in which it no doubt puts a different spin on the evidence it has gathered.

Nevertheless, the arguments go to the heart of the FTC's antitrust lawsuit. The trial is scheduled to start March 9.

Experts said the FTC's case rests on whether Intel's dominance of the PC chip industry is so great that antitrust law should take precedence over the intellectual property laws that Intel says should govern its behavior.

In its complaint, the FTC said Intel harmed competition when it stopped providing samples of upcoming Pentium chips to three companies that rely on the processors to build Intel-based systems -- Compaq, Digital Equipment Corp. (which was acquired by Compaq last year) and Intergraph Corp. Intel did this, according to the FTC, in a bid to force them to license microprocessor patents on Intel's terms.

By using its dominance to gain access to competing firms' intellectual property, Intel diminishes the incentive for companies to develop new PC chip technologies, thus harming competition and cementing its own dominance in the industry, the FTC argues.

Intel doesn't dispute the actions described by the FTC but says its hardball tactics were protected by intellectual property law and didn't pose a threat to competition. In the absence of evidence that Intel harmed competition, the FTC's complaint comes down to "subjective notions of 'fairness,'" Intel said in its brief.

Citing previous case law, Intel asserted that even acts of "pure malice by one business competitor against another" don't by themselves constitute a breach of antitrust law.

In the absence of evidence that Intel harmed competition, Intel repeated an earlier claim that the FTC has switched tracks and adopted a theory that has been made in the past by Intel rival Advanced Micro Devices Inc. (AMD).

The FTC now argues that Intel's conduct has prevented PC OEMs from innovating, which limited their ability to differentiate their products. This in turn made it harder for them to use processors made by AMD.

The FTC didn't immediately return a call seeking comment. It is expected to make its own pretrial brief available later today.