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Wednesday, December 16, 2009, 07:20 am PT (10:20 am ET)

FTC sues Intel over alleged anticompetitive tactics

The U.S. Federal Trade Commission announced Wednesday it filed a lawsuit against chip maker Intel Corp., accusing the company of illegally using its position to stifle competition.

The FTC has alleged that Intel "waged a systematic campaign to shut out rivals' competing microchips by cutting off their access in the marketplace. In the process, Intel deprived consumers of choice and innovation in the microchips that comprise the computers' central processing unit, or CPU."

In June 2005, Apple announced it would switch to Intel processors for all of its Mac products. Previously, Macs were powered by microprocessors from Freescale and IBM. By the start of 2007, the transition was complete.

Apple co-founder Steve Jobs said that his company was disappointed with the progress of the PowerPC technology. The Mac maker switched to Intel because they felt the world's largest chip maker could better suit their needs.

Intel's role in the chip market goes well beyond Apple. Its dominant presence in the PC market as a whole has caught the attention of the FTC, which believes that Intel used threats and offered rewards to computer makers Dell, HP and IBM to keep them from using rivals' products. The commission has alleged that Intel used a practice known as "restrictive dealing" to prevent manufacturers from marketing computers that do not feature an Intel chip.

"Intel has engaged in a deliberate campaign to hamstring competitive threats to its monopoly," said Richard A. Feinstein, Director of the FTC’s Bureau of Competition. "It’s been running roughshod over the principles of fair play and the laws protecting competition on the merits. The Commission’s action today seeks to remedy the damage that Intel has done to competition, innovation, and, ultimately, the American consumer."

The commission also claims that Intel has secretly designed compilers to deliberately restrict the performance of competitors' chips, like products from Advanced Micro Devices. It has alleged that Intel has "deceived" its customers by failing to disclose its practices, and claiming that software performed better on its chips than those of others.

Now, the FTC said, Intel has taken the same monopolistic approach toward Nvidia in the graphics processing unit market. In October, Nvidia announced it would cease development of future hardware until its ongoing lawsuit with Intel is settled sometime in 2010. Until then, the nForce chipset line has been placed on hold.

Intel is accused of violating Section 5 of the FTC Act, which prohibits unfair methods of competition and deceptive acts and practices in commerce. The chip-maker is also charged with illegal monopolization, attempted monopolization, and monopoly maintenance. The commission approved the suit 3-0.

Months ago, the FTC had taken an interest in Google and Apple, which shared two links between their respective boards of directors. After Eric Schmidt, chief executive of Google, resigned from the Apple board, and Arthur Levinson, former CEO of Genentech, left the Google board, the commission said it was satisfied with the outcome.