WASHINGTON -- The US Federal Trade Commission on Monday settled its antitrust lawsuit against Intel in part because its case against the chip giant was faltering, experts said.
Later Monday, Microsoft officials said Intel's proposed antitrust case settlement Monday had no direct impact on, or strong similarities to, Microsoft's own case being tried in Washington.
When the government launched its lawsuit last May, the commission depicted Intel as a freight train of a company that had left the rails of competitiveness and was threatening to smash its rivals into oblivion. Intel's revenues were US$25 billion and its profits were an enviable $6.9 billion, the complaint noted.
In fact, in 1997, Intel was the sixth most profitable company in the world. But the case was filed 10 months ago. Profit margins have since dropped, and revenue isn't quite what it used to be.
The Microsoft lawsuit, brought by the Department of Justice, demonstrated that the WinTel partnership was hardly a happy marriage. An Intel executive showed up to testify that the two companies have been sparring with one another over where their respective turfs begin and end.
Perhaps most importantly, the success of rival Advanced Micro Devices in the Pentium-clone business argued more eloquently than any Intel defense lawyer could that Intel didn't exactly have the hammerlock on the processor business that the commission had claimed.
"This was going to be a difficult case for the FTC," said Robert Litan, a former Clinton administration antitrust official now at the Brookings Institution.
Litan said that the public is more sympathetic to Intel CEO Craig Barrett than they are to Bill Gates, and that the company's market share is slipping.
Another factor in the FTC staff's decision to settle might be found in the original charges against Intel. Instead of accusing the company of a Microsoftian excess of anticompetitive malfeasance, the FTC argued that Intel did not give vital technical information to three other companies: Intergraph, Digital, and Compaq.
But Intel has a common-sense reply sure to resonate in the heart of any successful businessmen: We were battling those same three companies in court at the time. Why should we treat them like our best customers?
The lawsuits involved patent infringement claims. In May 1997, Digital sued Intel for allegedly violating its patents with the Pentium Pro. Intergraph also sued in 1997, claiming that companies using Intel technology were infringing its own patents. Compaq's suit charged that Intel violated patents owned by Compaq.
"I don't think the commission has a leg to stand on," says Robert Levy, a lawyer at the free-market Cato Institute. He said that Intel could easily argue it had "legitimate business reasons" to discriminate.
The case also isn't as broad as the Department of Justice's suit against Microsoft. The two agencies share antitrust enforcement authority.
For instance, the FTC didn't charge Intel with tying chips to motherboards or even seek a preliminary injunction to bar future action, which government attorneys seek in the Microsoft case.
In a terse one-paragraph request, both sets of attorneys on Monday asked the administrative law judge to withdraw the case "from adjudication for the purpose of considering an executed proposed consent agreement."
Brookings' Litan says the consent agreement is likely to require Intel to hand over technical information on some aspects of future microprocessors to all comers, not just preferred customers.
"I'm assuming that [Compaq, Digital, Intergraph] all got guarantees of access to the information," Litan said. "A broader relief would be a general nondiscrimination requirement. That would require Intel to treat everyone alike."
Compaq and Digital have settled their lawsuits with Intel.
Intergraph said Monday that it is continuing with its lawsuit, which addresses alleged antitrust violations, patent infringement, and illegal coercive behavior.
"We hope that the settlement reached by the FTC and Intel will ensure that Intel changes its behavior to give fair and equal treatment to the companies they do business with, and not cut off those companies from vital product and information that they need in order to compete," the company said in a statement.
Microsoft, at a regularly scheduled briefing, remained upbeat about eventually winning its case and had no comment on any efforts to reach a settlement of its own.
"We view our situation as our situation," said chief operating officer Bob Herbold. "We're going to do what's right for our consumers, and I don't believe you should think it affects our basic thinking."
He added, "We still believe we will prevail in court."
"I don't think it has an effect directly on our case," added Brad Smith, general counsel, international.
Smith said the Intel case is more closely related to an earlier Microsoft proceeding, which resulted in a 1994 settlement over how it handled the licensing of its software to PC makers.
The present case, he said, relates more to product development. The government alleges that Microsoft pushed its own Internet browser to gain unfair advantage in the market.
Smith said that he would not comment on whether any negotiations were under way, adding, "Obviously, there were discussions before the antitrust case was filed a year ago."
"While one always has to remain interested in pragmatic approaches, we cannot afford to compromise away the ability of our industry (to develop new products)," said Herbold.
Reuters contributed to this report.
