The FTC Sues Intel Over CPU & GPU Competition
by Ryan Smith on December 16, 2009 12:00 AM EST- Posted in
- CPUs
AMD and Intel have had their differences. And by differences, we mean Intel engaging in anti-competitive actions that they’ve been found guilty of in the European Union.
But all of this was supposed to come to a close last month, when AMD and Intel buried the hatchet and made up for past offenses. In return for some cash, some good behavior out of Intel, and for Intel to stop trying to block the Global Foundries deal, AMD would drop all of their civil and regulatory complaints against Intel. And that would be the end of Intel’s legal problems with various governments, right? No, as it turns out that’s wrong.
The catalyst for Intel’s legal woes (besides their own actions, obviously) has been AMD complaining to various regulatory boards about anti-competitive actions undertaken by Intel. Based on those complaints, the European Commission, the South Korean FTC, and the American FTC have been investigating Intel for some time now over these alleged actions. Intel has been found guilty and fined in the EU and South Korea (with both cases on appeal) while the American FTC has continued to investigate.
In fact despite the FTC just now suing Intel, this is actually about half-way through the process. The FTC investigation is done, and they have been negotiating with Intel in private for quite some time to get the matter settled. A lawsuit is the next step for the FTC, when those negotiations break down. Those negotiations have in fact broken down, so here we are: the FTC has sued Intel, and the biggest court battle ever for Intel is soon to begin.
What the FTC Accuses Intel of Doing in the CPU Market
As the FTC’s investigation into the matter is already over, they have published a complete list of complaints against Intel which will be the basis of the coming trial. Based on these complaints the FTC case is a significant departure from the EU and South Korean cases, as the FTC is accusing Intel over not only anti-AMD shenanigans early this decade, but of continuing anti-AMD and anti-NVIDIA shenanigans right up to this day.
The Athlon, the processor that's at the root of all of Intel's legal troubles
The case fundamentally breaks down into two halves: what Intel did against AMD in the CPU market, and what they’re continuing to do against AMD and NVIDIA in the GPU market. Let’s start with the CPU-focused complaints:
- The usual complaints we’ve seen from the EU. Intel rewarded OEMs to not use AMD’s processors through various means, such as volume discounts, withholding advertising & R&D money, and threatening OEMs with a low-priority during CPU shortages.
- Intel reworked their compiler to put AMD CPUs at a disadvantage. For a time Intel’s compiler would not enable SSE/SSE2 codepaths on non-Intel CPUs, our assumption is that this the specific complaint. To our knowledge this has been resolved for quite some time now.
- Intel paid/coerced software and hardware vendors to not support or to limit their support for AMD CPUs. This includes having vendors label their wares as Intel compatible, but not AMD compatible.
- False advertising. This includes hiding the compiler changes from developers, misrepresenting benchmark results (such as BAPCo Sysmark) that changed due to those compiler changes, and general misrepresentation of benchmarks as being “real world” when they are not.
Interestingly enough, the FTC cites Intel’s reasoning for all of this being that the company was at a competitive disadvantage, and engaged in these actions to buy time to improve their products. The timelines given place specific emphasis on the Athlon (K7) launch in 1999, and the Athlon 64 (K8) launch in 2003. This is a somewhat different take than in past cases, where Intel was merely accused of attempting to keep AMD’s overall market share down rather than specifically bridging performance gaps.
The FTC believes that the effects of all of these actions have (besides limiting AMD): served to drive up CPU prices, driven up CPU distribution costs, limited CPU innovation, harmed AMD’s ability to market CPUs, limited the ability of OEMs to innovate and differentiate their products, and reduced the quality of industry benchmarking.
Ultimately all of the CPU accusations are for things long past; none of the FTC’s CPU-related allegations are for things that have occurred in the last few years. We would not take this as a sign that the FTC is happy with the current market situation, but that they have no proof that they wish to follow up on that would show Intel as having engaged in anti-competitive actions in the CPU market in the last few years. The FTC does want some significant changes at Intel, which we’ll discuss in a bit.
Finally, there’s also the matter of AMD. Since AMD and Intel have settled their matters, AMD is presumably not going to participate in these proceedings as an ally of the FTC. As the FTC is going ahead on these charges, it’s clear that they aren’t worried about what this means for their position.
What the FTC Accuses Intel of Doing in the GPU Market
When we were first reading the FTC’s suit, the thing that caught us entirely off-guard was that it wasn’t merely about anti-competitive actions in the CPU market, but anti-competitive actions in the GPU market as well. While the CPU-related accusations are all for things done well in the past, the GPU accusations are fresh, very fresh. These run right up to today, and include the Larrabee project and the anti-competitive actions Intel has taken in the GPU market both outside and inside that project. To get right to the point, the FTC believes that as things currently stand, Intel is likely to get a monopoly on the GPU market similar to the one that they have on the CPU market, and that this monopoly will be created by abusing their CPU monopoly.
In the complaints about the GPU market, both NVIDIA and AMD are mentioned as being the primary competitors for Intel. The bulk of the complaints however are related to NVIDIA and their chipset business, as while AMD stands to be harmed too by an Intel GPU monopoly, it’s NVIDIA that stands to be the most harmed. In effect Intel has finally gotten AMD off their back for CPU matters, only to now have NVIDIA on their back for GPU matters.
The GeForce 9400M: Intel's chief competitor in the integrated graphics market and a threatened product line
Just to note where things stand, the FTC already estimates that Intel has approximately 50% of the GPU market. This is consistent with the vast number of Intel IGP-equipped computers that are on the market. Depending on how you intend to count various user bases, this stands to grow in the future as Intel puts their IGP GPUs first on-chip, and then on-die with their CPUs.
The basis of the FTC’s complaint here is that they believe Intel is threatened by the rise of GPUs as programmable computing devices, and that using them in GPGPU situations threatens Intel by making CPUs less important (something NVIDIA has been trying to play for ages) and as a result less profitable. The FTC argues that Intel is seeking to establish a monopoly here to maintain their overall control of (and high margins in) the computing market.
As for the specific complaints:
- Intel eliminated the future threat of NVIDIA’s chipset business by refusing to license the latest version of the DMI bus (the bus that connects the Northbridge to the Southbridge) and the QPI bus (the bus that connects Nehalem processors to the X58 Northbridge) to NVIDIA, which prevents them from offering a chipset for Nehalem-generation CPUs.
- Intel “created several interoperability problems” with discrete CPUs, specifically to attack GPGPU functionality. We’re actually not sure what this means, it may be a complaint based on the fact that Lynnfield only offers single PCIe x16 connection coming from the CPU, which wouldn’t be enough to fully feed 2 high-end GPUs.
- Intel has attempted to harm GPGPU functionality by developing Larrabee. This includes lying about the state of Larrabee hardware and software, and making disparaging remarks about non-Intel development tools.
- In bundling CPUs with IGP chipsets, Intel is selling them at below-cost to drive out competition (given Intel’s margins, we find this one questionable. Below-cost would have to be extremely cheap).
- Intel priced Atom CPUs higher if they were not used with an Intel IGP chipset.
- All of this has enhanced Intel’s CPU monopoly.
The FTC believes that all of this will help Intel to establish a GPU monopoly. This is on top of all other effects of Intel’s actions, which are similar to the effects of their actions in the CPU market: driving up GPU prices, driving up GPU distribution costs, limited OEM differentiation, and limited GPU innovation.
There’s also one last complaint unrelated to GPUs, which has to do with standards.
- Intel used their market position to delay AMD and NVIDIA’s implementations of USB and HDCP by refusing to make the specifications accessible until Intel’s products were ready. We know that there has been some strife among Intel and virtually everyone else over Intel dragging its heels on the USB3 specification, but it’s not clear if this complaint is about that.
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MengNa - Thursday, December 17, 2009 - link
IIRC most of these allegations, not including those concerning the GPU market, are about things that happened some while ago? Amazing that the FTC got around to dealing with it since I thought they were still hard at work on the Ford model T monopoly :) Who else gets the feeling that in about 10 years or so the FTC will come after Intel for getting into the SSD market?The GPU thing seems nonsensical... What do they mean by "Intel hurt GPGPU by developing Larabee"? What, more competition in the GPU market is bad? Does the FTC intends to maintain the duopoly the currently exists?
It really seems to me that most of the claims made by the FTC are whimsical and aimed to strong arm Intel into being more "competitive", which seems somewhat ridiculous, because actually complying with everything the FTC seems to want will actually raise prices and hinder the development of future products...
Maybe I'm wrong, but I think that sometimes the government needs to stay out of certain things, as it isn't exactly the foremost expert on ANYTHING and EVERYTHING.
rbfowler9lfc - Thursday, December 17, 2009 - link
Leave Intel alone! If they didn't exist, what were we supposed to use, AMD or Apple? Who cares for a buggy nVidia board to waste an i7 processor?zipzoomflyhigh - Thursday, December 17, 2009 - link
They lie, cheat, steal, bribe and infringe on copyrights, and you want us to leave Intel alone. LOL Typical fanboy response.It's a shame they filed this suite AFTER AMD settles with Intel, they could have gotten a lot more money. Makes you wonder if Intel paid off someone in the FTC committee.
LaughingTarget - Thursday, December 17, 2009 - link
The first three "complaints" are perfectly legitimate business practices. No business is required to sell products to customers. No business is required to sell products to customers for the same price.The first complaint. Wow, seriously? It's only bad when Intel does this? It's a standard business practice to offer bulk discounts and offer incentives to not buy a competitor's product. Intel is not obligated to provide funds for R&D and advertising. Business isn't a welfare system. And someone is going to get a low priority at OEM during chip shortages. Intel would clearly prefer to provide its best customers with the products. Again, business isn't welfare, Intel can operate how it choses so long as it does not violate contractual obligations. None of that was breached in complaint 1
The second complaint. This is only a problem if Intel advertised that optimizations functioned on AMD processors. Intel is, again, under no obligation to expend funds and resources making sure their products work for the competition.
The third complaint. Again, perfectly legitimate business move. This is common practice in every industry, yet (once again), useless entities (like the entire EU) have arbitrarily decided that the CPU business requires special treatment.
The fourth complaint. This is a completely valid complaint. However, this belongs in civil court. Purchasers of the compilers who made the purchase decision based on falsified specifications at exactly the amount of economic loss suffered.
Just like the Microsoft decisions promulgated in the US and EU, it had nothing to do with improving competition. The EU and US saw a means to generate more revenue for their bloated bureaucracies by fleecing a large, successful corporation of resources. It uses ill-concieved monopoly laws to do this. Did any of the supposed wronged parties ever see a red cent of the huge payout the EU slapped on Microsoft? Nope. It all went to the EU general fund.
The first three are perfectly legit business practices. It's crystal clear that if consumers actually wanted AMD processors, Intel's group discounts and labeling requirements wouldn't have an impact. If AMD was actually competitive (which they are not), any of these supposed "bully" tactics that Intel uses would only backfire and result in more sales of AMD processors. PC manufacturers have no intention of offering more AMD systems because the market simply doesn't want them. Using the blunt force of anti-trust won't accomplish anything but driving up the cost of Intel processors and giving respective governments more money to spend on abusive programs. People will still buy the Intel processor, even if the manufacturer doesn't get all the bulk discount deals.
If AMD wants to cut into Intel's market, build a better product at a price people want. If that can't be done, find something else to do. Quit whining to activist governments when someone does a better job.
mrd0 - Friday, December 18, 2009 - link
The first complaint is only legal standard business practice if you're not a dominant firm. It can be exclusionary pricing, or anti-competitive behavior, under the antitrust laws (Section 2 of the Sherman Act in particular) if you're a dominant firm. You need to look no further than case law to see this. Try LePage’s Inc. v. 3M, 324 F.3d 141 (3d Cir. 2003) for starters...BushLin - Thursday, December 17, 2009 - link
"If AMD wants to cut into Intel's market, build a better product at a price people want. If that can't be done, find something else to do. Quit whining to activist governments when someone does a better job."Er... were you paying attention when during the Athlon 64 / Athlon X2 vs. Penitum 4 / Pentium D days?
Large OEMs were simply not offering AMD's superior product at that time.
The company I was working for used Dell and HP but only Intel CPUs were available despite common knowledge that they were slower, less power efficient and more expensive.
Why was this? I would assume they're part of the reasons Intel are having their arse nailed to a wall right now.
Right now, Intel has the better products, but the position they're in was a result of anti-competitive practices which made us all suffer.
Scali - Thursday, December 17, 2009 - link
Don't forget that Intel is a much stronger brand than AMD. You know the old saying "Nobody ever got fired for buying IBM"?The same goes for Intel.
Especially the corporate market isn't going to change supplier overnight. Same with Windows for example. When a new version comes out, they don't just jump ship. They'll wait until it's proven itself in the field.
Another issue was poor supply of AMD parts. For companies like Dell it's only interesting to sell AMD systems if they can get a certain volume of units out the door, else it's not going to be profitable (too much overhead on developing and supporting different motherboards, drivers, bios, servicedesk etc).
I think AMD is mainly to blame for not capitalizing on their success. If AMD had a good successor to the Athlon X2, and had done more to build a strong brand in the public eye, then they wouldn't be in the current situation. They had their chance, and they blew it. I don't think Intel is going to allwo them another chance.
Penti - Friday, December 18, 2009 - link
I think you forget that AMD was common in use among big OEMs around the K6 - Slot A days. That was still computers bought from Taiwanese ODMs and contract manufacturers. And there's plenty of AMD Dells, HPs etc now. Plenty of OEMs sell computers with sis-chipsets and so forth. It has nothing to do with getting large supplies. Dell is like all the others for desktop PCs they can simply just buy a already designed/made motherboard from one of their Taiwan/China partners. Don't be retarded. There's plenty of Foxconn etc motherboards in Dell's. Foxconn produced AMD64-boards in this period of 2003-2006. AMD sold more then ever after their period of performance lead though, your views are just borked. It's price who has dropped back to pre AMD64 days or less. They even produce chips in Chartered since 2006.- Friday, December 18, 2009 - link
"Data from the Bureau of Labor Statistics show that between 2000 and 2006—a period that includes Intel's supposed monopolistic behavior—the quality and performance of microprocessors improved while prices fell at an annual rate of 48.9%. Over the same period, the prices of related items such as personal computers, storage devices and software also decreased. The typical goal of anticompetitive corporate behavior is to raise prices, yet computer products that cost thousands of dollars a few years ago now cost hundreds."Intel Net income (In Millions—Except Per Share Amounts) Deep discounts included
' 08 - $ 5,292......' 07- $ 6,976......'. 06- $ 5,044......' 05- $ 8,664......' 04- $ 7,516...... ' 03- $ 5,641.....'02- $3117
Intel owned the market, they can set discounted prices and still make huge profits, and in turn force smaller companies out- they traded discounts for market share. What's amazing in all this is that AMD survived
asH
BushLin - Friday, December 18, 2009 - link
What exactly are you demonstrating here? Some net income figures say very little by themselves, they certainly don't show what profit Intel were making on say, Pentium 4 chips.I don't know the full details of the FTC investigation but it stands to reason that, if they were making deals with OEMs to not use AMD's products, they'd have large income figures but a lower profit margin per unit.
Whatever the case, I'll be awaiting the official verdict and detailed findings, rather than some pasted figures that prove nothing.