Regulators, Intel Settle Antitrust Case
Intel Corp. agreed to end its antitrust battle with the federal government without paying a fine or admitting it has a monopoly in the semiconductor industry, although it will have to mend its strong-arm tactics under a surprise settlement announced Monday.
The settlement represents a victory for the Santa Clara, Calif.-based giant, which was accused by the Federal Trade Commission last year of abusing its market power. Had the government scored a clear-cut victory against Intel, it could have had a profound impact on the way major corporations control their technology.
But analysts said Monday that the agreement may have little effect in throttling the growth or technological dominance of Intel, which has become a worldwide symbol of U.S. supremacy in computers.
Intel deftly avoided the legal and political fireworks that have characterized the antitrust case against software titan Microsoft Corp., which has also been accused of misusing its high-tech monopoly. Intel deliberately took a nonconfrontational approach in defending itself.
While neither side would divulge details, sources close to the negotiations said the two sides agreed that Intel would not be deemed a monopoly--a key FTC contention that would have set the stage for further antitrust action against the company.
Instead, Intel will sign a consent decree in which it promises not to use its market dominance to force personal computers makers to share information about their new technologies.
The pact will not affect a broader ongoing probe of the chip maker, said William J. Baer, director of the FTC’s Bureau of Competition. That investigation--which focuses on the extension of Intel’s market dominance into other areas--could ultimately generate a separate antitrust case.
And the compromise may have only modest effects on the microprocessor and PC industries, because Intel will retain its commanding power over the market, antitrust and industry experts said.
Intel Chief Executive Craig Barrett called the settlement “a win-win for both parties,” noting that “we are satisfied that the agreement gives us value for our intellectual property rights.”
The case--filed in June on the heels of a separate government antitrust trial against Microsoft Corp.--was due to begin today before an administrative law judge in Washington.
Monday’s action highlights differences in style and strategy between Intel and Microsoft, which is accused of using the monopoly power of its Windows software to seize control over other software markets.
Intel had vowed to take a low-key approach to its case and promised that there would be none of the explosive e-mails and embarrassing retractions that have punctuated Microsoft’s trial.
By settling, Intel avoids months of portrayal in the media as a monopolist accused of predatory corporate practices. Because Microsoft took the opposite tack, its public image may be irreparably harmed--even if it prevails over the Justice Department, industry observers say.
The FTC had argued in a pretrial brief that “in effect, Intel established its own privately administered compulsory licensing regime” affecting three customers--Compaq Computer Corp., the world’s largest PC producer; Digital Equipment, a diversified technology company that is now a division of Compaq; and Intergraph Corp., a maker of sophisticated workstation PCs.
By coercing those companies to provide Intel with licenses to their inventions, the chip giant tried to establish a lock on innovation, the FTC said.
FTC commissioners are expected to approve the proposed settlement within a few days, then post it for public comment. After 60 days, the commissioners can formally approve the settlement.
Intel still faces a separate lawsuit filed by Intergraph that is expected to go to trial in U.S. District Court in Alabama early next year. That suit alleges a broader range of antitrust and unfair business practices, including patent-infringement accusations.
“The [FTC] settlement vindicates the position we have taken in our suit,” said Intergraph Chief Executive James Meadlock. “It defuses some of the propaganda that Intel has been putting out to the effect that the FTC did not have a case.”
He called the settlement “a cold breath” on Intel’s monopoly power.
However, legal experts viewed the compromise as logical for both Intel and the government.
“There was enough public criticism of the FTC that the staff was probably psychologically positioned to settle,” said Stephen Calkins, a former FTC general counsel and now professor of antitrust law at Wayne State University in Detroit.
And the absence of a judicial finding that Intel has monopoly power preserves its ability to fight that issue in the future, as in the Intergraph suit, said Howard Morse, a Washington antitrust expert who served as an FTC enforcement attorney until shortly before the Intel case was filed.
Industry observers predicted that Intel would realize substantial indirect benefits from the settlement--particularly relief from intensive and potentially negative public scrutiny.
“In our industry, people point to Intel as the company that crossed the chasm; they took the Intel name and created an incredibly strong brand with it,” said Lerry Wilson, a principal at Wilson McHenry Co., a leading high-tech PR agency. “Intel recognizes the power of public perception on their brand, and they are doing everything they can to protect that.”
The abrupt conclusion of the case also suggests that the Clinton administration may have miscalculated in pursuing the case. Although the federal government has been attempting to focus tougher enforcement against major corporations, some former government antitrust attorneys said Monday that the Intel case was based on a weak interpretation of antitrust law.
By settling, Intel immediately removed a costly management distraction.
“A fight-to-the-death strategy is not always the way to go, even if at the end you would win. The great cost is uncertainty,” said Daniel Schwartz, a Washington antitrust expert who worked as an FTC attorney in the 1980s.
The Microsoft case could work its way up to and through the Supreme Court, a process that could take years--during which the company could face considerable uncertainty in its long-term planning and business prospects.
In contrast, Intel might now proceed with a circumscribed, but characteristically aggressive approach to its business, as the stock market recognized. In Monday trading, the chip maker’s shares gained $5 to close at $119.63 on Nasdaq.
