The FTC Sues Intel Over CPU & GPU Competition
by Ryan Smith on December 16, 2009 12:00 AM EST- Posted in
- CPUs
Intel’s Response
Intel wasted no time in responding to the FTC’s suit. In their response, Intel has denied the accusations, and insisted that they have competed “fairly and lawfully,” noting that prices (ASPs) have been declining at a rate faster than any other industry.
Of particular note in Intel’s response is their claim that the FTC’s case “is based largely on claims that the FTC added at the last minute and has not investigated.” This we’re assuming means all of the GPU-related claims. You can read into this several ways, but our take is that Intel is more concerned with the GPU-related claims than the CPU-related claims at this moment.
Finally, Intel is understandably annoyed that this even reached the lawsuit stage. As we mentioned before Intel was already in settlement talks with the FTC, and believes that the issue should have been resolved there. In the failure of these talks, Intel has cited that the FTC “insisted on unprecedented remedies – including the restrictions on lawful price competition and enforcement of intellectual property rights set forth in the complaint.” As the FTC would not back down on their requested remedies and Intel would not accept them, this is what has lead to the case moving on to a lawsuit.
What the FTC Wants
So what does the FTC want? For one thing, not money. In their claims and requested remedies, they have not asked for any kind of fine, but rather are focusing exclusively on enforcing changes in the way Intel conducts business. This means their remedies are entirely corrective, rather than being a mix of corrective and punitive remedies such as what the EU has gone for.
What the FTC wants for Christmas: For Intel to license DMI
For their corrective remedies, here is what the FTC wants:
- For Intel to stop doing all of the things mentioned above.
- Intel cannot require OEMs to purchase only Intel CPUs and GPUs, purchase them in specific quantities, or to not purchase competitors GPUs and CPUs. This is effectively a stab at the rebates Intel has been offering for bulk purchasing, and the advertising help Intel has been offering to bulk purchasers.
- To stop prioritizing CPU shipments to loyal OEMs.
- To stop withholding technical support from disloyal OEMs.
- For Intel to be disallowed from producing/distributing any software or hardware that unreasonably excludes or inhibits the performance of competitors’ GPUs and CPUs.
- To stop selling things below cost. The FTC is defining this as being the average variable cost plus a “contribution to Intel’s fixed sunk costs in an appropriate multiple of that average variable cost.”
- For Intel to do a few different things about the versions of their compiler that put AMD at a disadvantage (which the FTC is calling the Defective Compiler): offer a substitute compiler to customers for free that is not a Defective Compiler, or to compensate customers in switching to another compiler, to provide notice to software buyers of products compiled using the Defective Compiler that they may need to replace their software.
- To stop Intel from making misleading statements.
- To prevent Intel from coercing benchmark organizations into adopting misleading benchmarks.
- For Intel to license the QPI and DMI buses to 3rd party chipset manufacturers.
- For Intel to not block the Global Foundries deal (AMD and Intel already settled this) or any similar deal that VIA might make.
- For Intel to stop badmouthing competing products unless they have solid scientific evidence.
- For Intel to foot the bill for the independent organization that will monitor this.
It’s a long list, but there’s nothing in it that’s particularly surprising. The FTC’s ultimate goal is to get Intel to stop engaging in all of the anti-competitive actions they have been engaging in for the last decade, and to have them directly monitored for an indefinite period of time in the future to make sure they do not resume these actions.
On an interesting note, the FTC chose an unusual way to go about this suit. Without getting into the nitty-gritty of anti-trust laws, the FTC has multiple sections of the FTC act to charge violators under. Normally when they engage in a lawsuit, they charge them under Section 2, which allows for harmed consumers to sue violators in private for triple damages. The FTC has decided that it’s in the best interest of everyone to not open Intel to that kind of liability or to take the risk that they’ll lose the suit based on that kind of liability, and instead charge them under Section 5. The big difference between the sections is that a Section 5 violation only leaves Intel open to the damages caused by their actions, and not to triple that price tag. Overall the use of Section 5 is very rare compared to Section 2, but the use of it is growing according to the FTC.
At this point we do not have any idea what the price tag would be on damages for Intel if they were to lose this suit, but it’s a reasonable expectation that it won’t be cheap, going into the billions of dollars. Triple damages would make that even higher. As triple damages were established as a punitive solution, this is consistent with the FTC’s position that they are not trying to enact a punitive remedy upon Intel.
Conclusion
So when does this battle royale kick-off? Not for a while, it seems. The case is currently scheduled to go before a judge on Wednesday, September 15th of 2010, which is 9 months from now. Even if it were to start on time (it likely won’t), a ruling would take an equally long time. It may be 2012 before the case is ruled on, later if the case starts late.
In the meantime, there are the positions of NVIDIA, Intel, and AMD to consider. Despite the FTC’s immediate concerns, with the recent cancelation of Larrabee Prime, Intel probably isn’t the risk to the GPU market that the FTC believes they are. The question will be what Intel will be announcing in 2010 as the successor to Larrabee Prime, and what actions they may be taking. It’s not in their best interests with this case to engage in anything that might be seen as disparaging of AMD or NVIDIA GPUs, which in turn may influence Intel’s actions here.
As for AMD, for them this entire matter is largely settled when it comes to CPUs. Their exposure on the GPU side is a bit more nebulous – they aren’t going to make integrated GPUs for Intel processors, so their exposure is in the smaller discrete GPU market. Without a better idea of what the FTC is accusing Intel of when it comes to discrete GPUs, it’s hard to say what the impact of this is. If this stops Intel’s anti-GPGPU efforts however, then it’s going to be good news for AMD’s efforts in that field.
Fermi: Intel's greatest fear?
And finally there’s NVIDIA. NVIDIA has been on a crash-course with Intel for some time now, and they would have it no other way. For NVIDIA this has been a very good month: first Larrabee Prime gets canceled, and now the FTC is going to fight Intel in court over several issues that effectively has the FTC fighting Intel on NVIDIA’s behalf. This could go a very long way in boosting NVIDIA’s GPGPU efforts with Fermi, not to mention the fact that the IGP chipset business has been quite good to NVIDIA lately and is something they would like to continue. This suit could come quite close to defanging Intel from NVIDIA’s perspective.
On a long-term perspective, we’re left wondering where this is going to leave the entire market when it comes to GPU/CPU integration. Both AMD and Intel have been pushing it, with Intel preparing CPUs with both on-chip and on-die GPUs. Could a successful FTC suit put a stop to this Fusion for Intel? Will this slow down or stop GPU/CPU integration for the entire market, and greatly benefit CPU-less NVIDIA in the process? The outcome of this case could very well have an impact greater than just stopping any anti-competitive actions Intel is engaging in, so it’s going to be something we’ll be keeping a very close eye on.
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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.