SAN FRANCISCO -- As expected, the U.S. Federal Trade Commission on Wednesday (Aug. 4) made public details of its settlement agreement with Intel Corp. over charges that Intel used anticompetitive tactics that stifled innovation and harmed consumers in the market for computer microprocessors, graphics processing units and chip sets.
Intel (Santa Clara, Calif.) was not fined under the deal. Terms of the settlement include numerous provisions similar to those agreed to by Intel in a November 2009 settlement with rival Advanced Micro Devices Inc.
Dean McCarron, principal of market watcher Mercury Research, noted that the settlement with the FTC offered a significantly different outcome for Intel than what occurred in Europe in 2009, when the European Commission, the regulatory arm of the European Union, fined Intel 1.06 billion euros ($1.45 billion) for anticompetitive behavior. Intel continues to appeal that ruling.
"I suspect that one of the factor shere was the AMD settlement," McCarron said. "In many respects the FTC settlement is echoing what was in the AMD settlement, which was on par with the settlement that occurred in Europe."
McCarron said he didn't see a lot of winners and losers in the agreement, which he desicribed as "codifying the status quo."
“This agreement provides a framework that will allow us to continue to compete and to provide our customers the best possible products at the best prices,” Doug Melamed, Intel senior vice president and general counsel, said in a statement. “The settlement enables us to put an end to the expense and distraction of the FTC litigation.”
Intel admitted no wrong doing as a condition of the settlement. The deal approved by the FTC is subject to 30 days of public comment and final approval by FTC commissioners.
Among other things, Intel agreed not to offer discounts on microprocessors in exchange for agreement to also purchase other Intel chips such as graphics processors. The settlement also imposes other restrictions on the types of discounts Intel can offer OEMs.
Intel also agreed not to use retaliatory tactics against OEMs that buy products from competitors and to use a standard PCI bus on all mainstream microprocessors. It also will begin sharing technical information on required interfaces for its microprocessors with competitors for a period of five years.
McCarron said he was little surprised by some of the technical details in the settlement, including the requirement that Intel include PCI Express (PCIe) interfaces in its microprocessors. He said he suspects this was heavily lobbied for by graphics chip vendor Nvidia Corp., one of the Intel competitors considered in the FTC investigation.
"The settlement essentially guarantees that PCIe is going to be present within the system for at least six years," McCarron said. "That means Nvidia is going to have a place to connect their graphics. They can't be locked out this way."
McCarron noted that Nvidia and Intel still have litigation pending over a bus licensing agreement between the two companies that would not be impacted by the FTC settlement.
A spokesperson for Nvida said the company supports the FTC's action against Intel. "Any steps that lead to a more competitive environment for our industry are good for the consumer," the spokesperson said, in a prepared statement. "We look forward to Intel's actions being examined further by the Delaware courts later this year, when our lawsuit against the company is heard."
The settlement gives regulators the right to appoint technical consultants to monitor Intel's compliance at Intel's expense. It also requires Intel to offer reimbursement on Intel Compiler to those who were harmed because they did not realize the software was optimized specifically for Intel processors.
The fact Intel must offer a PCI interface on its processors should open the door for Nvidia to sell graphics and chip sets for all Intel parts without needing to license Intel's new QuickPath Interconnect, an agreement Nvidia had not been able to secure. That's big in itself.
Intel should have been fined a billion or so dollars, but more importantly the FTC should have pursued criminal charges as well. Why should "big oil" receive the brunt of media hatred while criminal monopolies like Intel and Microsoft escape prosecution? I need oil and gasoline, but I'm beginning to see that chips from Intel and bloatware from Microsoft aren't worth much. I say take the executives to court on criminal charges, and put them in shackles and orange jumpsuits to and from court, then put them in prison for long sentences. That should cut down on criminal behavior in the tech sector.
The agreement needs to cover QPI. It is needed to connect to IO hubs and interconnect CPUs in multi-processor systems. (can also be used for graphics processor and other co-processors). Guys @ FTC missed the boat on this one. Sure DMI and PCIe can be used but the high margin products are not included. AMD and Nvidia product were always 8-12 months ahead of Intel products before QPI. Without QPI, Nvidia / AMD / VIA / SIS can't provide a full market portfolio.
The FTC should also not have agreed to their technical consultants being approved by Intel even if Intel paid for them. The $2 million limit over 10 years for the cost of those consultants seems on the low side. It would have been better to have a team of independent consultants under NDA. Alternatively if the consultants would not be acceptable, a reason should be given with an override by FTC a-la 'advise and possible no consent'.
@CamilleK- agreed about the $2 million. It's hard to imagine that will cover the salaries of multiple technial people over 10 years. Even though the order is supposed to be in effect for 10 years, I get the feeling the FTC doesn't it expect to to be necessarily relevant for that long.
Given the speed of technology changes I would expect that in 10 years all of the chips/technology would not be relevant anymore. What is relevant is the settling of the the charges and the fair play ruling for Intel and non-Intel devices. I am a big fan of competition and using newly developed technologies to create market differentiations but blocking out competitors while good for self interest does not help consumers or technology advancements.
I'd love to hear more comments from folks like BobbyTsai on whether access to PCI interfaces is enough to open the door for third-party graphics--or do they need access to cache coherent interconnects like Intel's QPI.
Intel has started a pattern that questions its ethical behavior in the market. When I was approached to join this great technical company, I was turned off because for all its microprocessor, Intel does not come our 'normal' to me. It fires staff anyone and bullies in the market. That is not the mark of a leader. They better learn how to act in this world
The real problem with ‘settlements’ like these is they legitimize unacceptable behaviour and that strikes at the very heart and soul of society. Whatever the grand posturing, this is an unequivocal whitewash with self-congratulations all round for the regulators who, in reality, have failed to protect the market. The real world knows this of course so all these 'slap on the wrist’ judgements do is to undermine regulatory authority. This is yet another bad day for capitalism and a sad day for America. It’s a sad day too when firms have to resort to cheating and dirty tricks to stay on top of the game. Regulators are there to rein back these excesses, not condone and legitimise them.