Tech Association Welcomes FTC Decision To Investigate Intel On Antitrust Matters

BY CCIA Staff
June 6, 2008

The Computer & Communications Industry Association commends the Federal Trade Commission for opening up a formal antitrust investigation into Intel’s alleged anticompetitive practices.

This news comes days after Korean antitrust regulators fined Intel $25 million for abusing its dominant position in the microprocessor market and the European Commission announced plans to rule in their case against Intel by September. Besides the recent events in Europe and Korea, Japanese regulators ruled against Intel’s practices in 2005 and the New York State Attorney General’s Office announced their own investigation in January of this year. CCIA said word of the FTC’s investigation sends a clear signal that the agency, which has been less aggressive in its enforcement in recent years, may now be taking competition in the high-tech markets, markets that are crucial to our future economic success, more seriously.

“This is a very positive development,” said Ed Black, President and CEO of CCIA. “Although those of us following the case were pleased in the response from major competition agencies around the world, the lack of a formal investigation by the FTC was disheartening. Now, the most influential antitrust authorities from North America, Europe and Asia have either opened a formal investigation or already ruled against Intel. It is good to see antitrust agencies from around the world committed to fair competition in the high tech arena.”

Antitrust law does not make market dominance illegal. However it does seek to prevent dominant firms from using their market power in anticompetitive ways. With 80% of the units sold and 90% of the revenue in the microprocessor market, Intel clearly has supra-dominant position “If they were conditioning rebates to computer manufacturers on limiting or foregoing use of their competitors’ products, then this would be a strong indication of an antitrust violation. Indeed, this is what authorities in Japan and Korea have already found,” Black said.

These actions have consequences for computer manufacturers and ultimately the customers they serve. “Without viable and vigorous competition, innovation and price competition in this vital area would stagnate,” Black said.

A recent study published by the ERS Group found that Intel was able to extract $60 billion in monopoly profits from 1996-2006. “If Intel is able to successfully cut off its competitors’ air supply and force them out of the market, that number is likely to increase in the next decade and the prices of everything from servers to computers to mobile devices will be kept artificially high,” Black said.

“It is vitally important that antitrust authorities act now to reign in anticompetitive behavior before it too late,” Black said. “The extremely high start-up and capital expenditure costs associated with the microprocessor market make new entry into this market very difficult if not impossible. It is essential that action be taken while viable competitors still exist.”

As for what FTC’s involvement in this antitrust matter means for the future, Black said, “We hope it reflects the beginning of a sea change that will continue into the next administration. Antitrust is just too important to ignore.”

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