Federal regulators emerged from a closed-door meeting today with news that's been anticipated for months: Intel Corp. (INTC) will be sued by the US government for allegedly violating antitrust laws by exerting its market dominance to muscle its customers and competitors.
Today's action is just a first step against Intel. The FTC is widely expected to try to expand the charges.
In preparing the case against Intel, the FTC staff has looked at the company's relationship with an Alabama computer-maker, Intergraph, and its sometimes convoluted relations with Digital Equipment Corp., Compaq Computer, Acer Computer, and Packard Bell.
In March, a federal judge ruled that Intel used life-and-death market power to block information and enabling technology that Intergraph needed to stay in business.
The judge issued a preliminary injunction ordering Intel to provide the same kind of service to Intergraph it provides to other customers. Intel followed the order but appealed. The FTC weighed that decision and Intel's similar action against computer-equipment maker Digital Equipment Corp. and decided to proceed.
Intel officials have previously acknowledged in other cases that the company has refused to share product information but argued that such practices are perfectly legal. The company's success and size, they contend, doesn't strip it of its intellectual property rights.
Intel has argued it has a right to stop giving advance proprietary information to customers on its latest products if they refuse to share their intellectual property in return.
The government has now moved against both halves of the Wintel combination. Last month, the Justice Department and 20 states filed a major antitrust action against Microsoft, whose Windows operating system, along with Intel's microprocessors, dominate the personal-computer market. The Intel case, however, would appear to be far more cut-and-dried than the Microsoft action.
The broad arguments in the case against Microsoft and Intel are similar. But there are some important differences between the Justice Department and the FTC, the two agencies charged with enforcing the nation's antitrust laws.
The FTC is expected to bring its case against Intel before an administrative law judge, who -- although independent -- is an FTC employee.
A decision by the administrative law judge could be appealed to the full commission and then to a US Court of Appeals. The Justice Department brought its case against Microsoft before a US District Court judge.
The FTC may have a bigger legal club than the Justice Department. The law which created the FTC is subtly more powerful than the Sherman Antitrust Act under which the Justice Department sued Microsoft.
"The statute the FTC is enforcing, properly construed, is broader than the Sherman Act and covers more offenses," said Steve Axinn, an antitrust expert with the New York law firm of Axinn, Veltrop & Harkrider.
Even before a case was green-lighted, it drew attention on Capitol Hill.
On Friday, Senator Slade Gorton, a Republican from Washington who's a compatriot of Microsoft and a critic of Justice Department's suit against the software company, wrote FTC Chairman Robert Pitofsky to express dismay that the commission might act against Intel, which he called an American success story.
"This is not the proper role for the federal government," Gorton said, calling a possible suit "another example of the misguided policies of the Clinton administration."
