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The Federal Trade Commission needs to do a better study of Intel and chip the market before it pulls the trigger with a veritable scattershot of last-minute accusations.

In addition to the FTC's litany of charges against Intel relating to the chipmaker's alleged anticompetitive behavior in the central processing unit, or CPU, market for PCs, the FTC document also refers to "Intel's unfair methods of competition...and future competition in the relevant GPU (market)." GPUs, or graphics processing units, and CPUs comprise the two main processors in all PCs.

A more thoughtful, studied, and contemporaneous analysis by the FTC would reveal that future personal computing markets are not so much about graphics chips--which is the basis of its new found emphasis on Nvidia as the object of Intel bullying and misbehavior--but about small mobile devices. And here Intel faces a raft of competition and is at least a year behind its rivals.

And that includes Nvidia, whose tiny Tegra processor is already in the Microsoft Zune HD and the Samsung M1 and whose next-generation Tegra 2 chip will be in dozens more handheld devices and smartphones. Intel's current offerings in this space? Zero.

Nvidia's Tegra processor is based on the same ARM design that other competitors use such as Qualcomm, Texas Instruments, Samsung, Apple, and Freescale Semiconductor use. And which Nvidia's CEO Jen-Hsun Huang said is expected to account for half of Nvidia's business in a few years.

Unbelievably, the only reference to ARM in the FTC complaint is: "Another example of a non-x86 microprocessor architecture is ARM. ARM is used primarily in handheld devices and mobile phones." One sentence in a 20-plus page document seems oddly dismissive, as though ARM was practically irrelevant to future chip market competitive dynamics as relates to Intel. Especially when you look at it in the context that that FTC is referring to the world's most popular consumer chip architecture--that is, ARM.

How large is this exploding market today? The ARM processor market totaled well over 2 billion units shipped in 2008. The "x86" PC chip market, where Intel and Advanced Micro Devices compete, a fraction of this--a few hundred million.

"The growing market is...a whole swath of interconnected devices and Intel doesn't have much a presence there," said the CEO of ARM Warren East in an interview I had with him recently in Los Angeles. And he accurately asserted that ARM can either match or exceed Intel in market clout and spending because it works, to some extent, in concert with the manufacturers--like TI, Nvidia, Samsung--that collectively have a massive revenue stream to tap into for marketing and research and development. "Well, actually there's about $25 billion of ARM semiconductor revenue coming in through the front door. So, it isn't Intel versus ARM, it's Intel versus everybody else," he said.

And if there is any truth to the Google Netbook rumors, ... Read more

(Updated at 1:56 p.m. PST, after I put down my own bottle of Lapin Kulta.)

If you've ever spent a long night drinking with Finns, you may have noted that after the 10th beer, they can become jolly, effusive, and positively inventive. Well, please hark the words of Martti Roth, an alleged employee of Intel Finland, who thought of something rather special while under the influence of alcohol.

I am not libeling him, truly. Because Roth says he really did come up with the notion, while at a bar, that he and his Intel friends should create the world's biggest Intel chime ever by firing themselves out of cannons.

On the special Intel Cannonbells site, Roth declared: "I thought about the biggest, most exciting way we could create those five notes. And the longer I stayed in the bar, the more sense it made."

Roth says he is a field applications engineer. And his family has a history with cannons. No, not in some 19th century war, but, well, it sounds like a tragic story.

"In 1906, my great grandfather tried to fire himself from a cannon over the widest part of the river Vantaa in Helsinki," Roth said on the site.

I cannot imagine why he might have made this interesting choice. In answer to the question "did he make it?" Roth replied: "Some of him did. Funny really, but on the day [of the Intel Cannonbells launch], I really felt as though he was looking down on me and guiding me through the air towards that big, metal pipe. It was very emotional."

I cannot possibly suggest that Roth did this interview when still under the influence of the finest Lapin Kulta (supposedly Finland's finest beer). Or that, as some (including the site's disclaimer writers) might suggest, he is merely an actor.

Oh, all right, here's the full, tucked-away disclaimer: "All copy and videos are part of a marketing campaign for Intel Sponsors of Tomorrow. No Intel employees were harmed in the making of this film. All characters featured in the videos were played by actors specially trained in silly costumes and Finnish accents. Do not, under any circumstances, attempt to fire anyone out of a cannon."

Still, I trust that the video will inspire you to aim higher in the coming year to create technological feats that will truly make a noise in the commercial world. Even if it might make you mistrust Finns a little in the immediate future.

Microsoft and Intel this week are finding themselves on opposite sides of antitrust favor, while Facebook may find itself in the crosshairs.

Microsoft and the European Commission have settled their differences over the choice of Web browsers in Windows. As part of the settlement, Windows PCs sold in the European Economic Area will now present users with a Choice Screen, allowing them to install alternative browsers beyond Internet Explorer.

The Choice Screen will offer users the ability to install up to 12 of the most widely used Web browsers that run under Windows. The choices will include the more widely known browsers, such as IE, Apple's Safari, Google's Chrome, Mozilla's Firefox, Opera, and AOL's browser, and lesser-known products including Maxthon, K-Meleon, Flock, Avant Browser, Sleipnir, and Slim Browser.

Microsoft initially proposed stripping a browser out of Windows 7 entirely, a move first reported by CNET. Both competitors and the EU balked at that idea though, instead favoring some sort of ballot screen. Microsoft eventually relented, though the company and its rivals have gone back and forth for a while over the details.
•  Microsoft top lawyer: EU deal opens new chapter

FTC sues Intel over 'anticompetitive tactics'

The agency says Intel has robbed consumers of both choice and innovation in microprocessors, "running roughshod over the principles of fair play."
•  FTC wants Intel to mend its ways
•  Graphics chips a new legal front for Intel
•  Nvidia CEO: FTC action 'transforms' industry

FTC may enter latest Facebook privacy debacle

Scattered griping about the social network's new privacy policies could turn into a firestorm, as EPIC complains about the decision to push more member content public.
•  FTC's new strategy: Kick 'em when they're down

More headlines

Microsoft: We did copy Plurk's code

The software maker says that an investigation shows that the Juku microblogging application on MSN China did swipe code from a rival.
•  Plurk holding Microsoft's feet to code-copying fire
•  Start-up claims Microsoft China took its code
•  Microsoft investigating charges it stole rival's code
•  Microsoft pulls China blog site amid code-theft charges

787 Dreamliner takes to the sky

After two years of delays, Boeing's new plane finally got off the ground Tuesday. Its first flight was witnessed by thousands of company employees and excited fans.

Google phone looks 'supersharp'

After Google distributes its Android phone to employees to test, CNET gets a look. The slick-looking unlocked HTC "mobile lab" device runs the Android 2.1 operating system.
•  Inside the Google phone: A 'snappy' chip

Facebook sues men for allegedly phishing, spamming

Facebook's latest lawsuit accuses three men of getting access to Facebook user accounts by phishing and then sending spam from their accounts.
•  Facebook's audience is diverse--carve it up, advertisers
•  How to hide your Facebook friends list
•  Russian firm DST on a roll, upping stake in Facebook?
•  Facebook helps reunite woman with her rescuers
•  Forgot your anniversary? Facebook's got it covered

Firefox, Adobe top buggiest software list

Open-source Firefox reports all holes, putting it at the top of the list for bug reports, while Adobe replaces Microsoft in the second spot, reports find.
•  Adobe to patch zero-day Reader, Acrobat hole
•  Firefox 3.6 beta released

Study: The road ahead for electric cars

Decisions made in 2010 will play a crucial role in shaping how consumers and the auto industry adopt all-electric and hybrid vehicles.
•  Struggling Saab finds partner on electric vehicles
•  Yet another hybrid supercar
•  Plugless power is coming

Also of note
•  Biden to unveil $2 billion in broadband grants
•  Windows 7 leaving Redmond's help desk less busy
•  PC shipments turn positive in third quarter

Editors' note: This is a guest column. See Larry Downes' bio below.

Wednesday's announcement that the Federal Trade Commission had filed a complaint against chipmaker Intel came as quite a surprise.

Not because of the allegations themselves, which focus on illegal tactics the company allegedly uses to maintain its dominance in the market for PC and server CPUs. Nearly all of them have already been cited in regulatory actions in the United States and abroad.

Earlier this year, the European Union fined Intel nearly $1.5 billion for conduct similar to that alleged in the FTC complaint (an appeal is pending). New York State Attorney General Andrew Cuomo, likewise, filed an antitrust case against the company in November. Private antitrust suits, notably by competitor Advanced Micro Devices, have been ongoing since 2005. Japan and South Korea have already concluded their own actions against the company.

Rather, what is surprising about the FTC complaint is its timing. Given the range of both public and private litigation against Intel, it's hard to see what the FTC hopes to achieve by jumping in so late in the game. Indeed, the commission had been investigating the chipmaker since June 2008, before the EU reached its decision and before a landmark settlement between Intel and AMD was reached in the private lawsuit just last month, in which Intel agreed to pay AMD $1.25 billion and cross-license various patents.

According to Intel's statement Wednesday morning, the company and the commission had been close to a settlement "of all outstanding issues with the FTC" when the commission instead decided to issue its complaint.

The real deal
So what's going on here? Let's start by looking at a few key differences between the FTC action and those brought by other litigants. First, the FTC complaint broadens the charges against Intel. In early December, sources reported that the FTC had widened its investigation beyond CPUs to include anticompetitive behavior in graphics processing units, in which Intel is alleged to control about half the market.

Nvidia, one of Intel's main competitors for GPUs and itself a party in still another lawsuit, confirmed that the FTC had contacted the company about its investigation. (In a Wednesday statement, Intel argued that the GPU claims have not been fully investigated by the commission and are therefore premature. It appears that the addition of these new issues derailed the settlement talks, leading to Wednesday's action.)

The FTC's proposed remedies are much broader than those sought in any of the other litigation. Rather than seeking fines, penalties, or money damages, the commission intends to enforce wide-ranging changes to how Intel operates.

Second, the FTC's complaint alleges multiple violations of the Federal Trade Commission Act, which only the commission has the authority to enforce. Under section 5 of the act, the commission may use its power to remedy practices that have not yet reached the threshold of harm necessary under either the Sherman Act or the Clayton Act, the more general antitrust statutes. As the U.S. Supreme Court put it in a 1953 case, the commission quotes from in the first sentence of its complaint, section 5 gives the FTC power to "stop in their incipiency acts and practices which, when full blown, would violate" the Sherman or Clayton acts.

Third, and perhaps most disturbing, the FTC's proposed remedies are much broader than those sought in any of the other litigation. Rather than seeking fines, penalties, or money damages, the commission intends to enforce wide-ranging changes to how Intel operates.

For starters, the FTC wants to limit Intel's use of bundled prices, quantity discounts, minimum purchase guarantees from original equipment manufacturers, pricing products below cost and other long-standing industry practices. Moreover, the commission intends to require Intel to license its technology to "others" on terms and conditions "as the commission may order" and to require Intel to preclear any future acquisitions, including purchases of intellectual property such as patents and copyrights.

These and many other restrictions on Intel's conduct would be overseen by an independent monitor appointed by the FTC. Intel would also be required to submit "periodic compliance reports" with the commission.

In short, if the FTC goes forward with its complaint, and Intel is ultimately found to have violated the FTCA, the company would find itself closely regulated for an undetermined period of time by the commission and its outside monitors. Even advertising and promotional materials would need to be reviewable on demand by the government.

Notable timing
None of these differences, however, add up to a justification for the FTC's decision to insert itself into a complicated matrix of ongoing litigation, just as the other actions are or are close to reaching resolution.

For starters, if the GPU claims are as strong as the commission says they are, then they could easily have formed the basis of a separate complaint, filed once the FTC had had a full opportunity to investigate them.

As for the FTCA, the FTC undermines its own argument that the special powers of section 5 are necessary to repair the semiconductor market. The commission notes throughout the complaint that Intel's monopolies and the behaviors it is seeking to remedy, with the exception of the GPU-related violations, have been ongoing since 1999--the year in which Intel and the commission settled an earlier section 5 complaint. Given that so many other lawsuits are already years in progress, it's unlikely that any "incipient" behavior is involved here; whatever Intel has done, it has done for years.

While the FTC complaint duly invokes "harm to consumers" 31 times in its complaint, evidence of any real damage will be hard to come by.

The FTCA is a red herring, in any case. As leading antitrust scholar Richard A. Posner noted in 2005, expansion of the Sherman and Clayton Acts over the years has left no real difference between the more general antitrust laws and the FTC's special powers under section 5. Private enforcement or lawsuits brought by the Department of Justice or state attorneys general now cover all the behavior that may have been subject only to what was once the broader powers of the agency.

The FTC's belated decision to pursue Intel brings Posner's longstanding critique of the commission into sharp focus. Posner, who has questioned the effectiveness of the commission since 1969, concluded in 2005 that the agency's continued existence might be justified, not for its enforcement of antitrust laws, but rather on the basis of its unique role in protecting consumers against fraud. The Department of Justice is a "powerful and highly regarded" federal agency tasked with enforcing antitrust law, Posner wrote, "but there is no counterpart federal agency that tries to protect consumers against fraud and oppression--unless it is the Federal Trade Commission."

And while the FTC complaint duly invokes "harm to consumers" 31 times in its complaint, evidence of any real damage will be hard to come by. Thanks to Moore's Law--Intel founder Gordon Moore's promise that semiconductors will continue to get faster, smaller, and cheaper every 12 to 18 months--the price of raw computing power has fallen dramatically and consistently since Intel was founded. Consumers are not being tricked or misled into buying computers with Intel processors.

Protecting consumers?
The commission can blow all the smoke it wants to about ensuring "freedom of choice" for consumers, but for better or worse, this litigation and all the rest of it is being brought for the benefit of Intel's competitors. Which is not to say that Intel hasn't violated anticompetition laws and that those violations, if left unremedied, "will have an adverse effect on competition and hence consumers," as the FTC delicately puts it.

Perhaps they will. But there is another, greater danger here, and that is the harm to the entire semiconductor industry that will result from regulators stepping in to resolve what are, in essence, private fights between Intel, its competitors, and some of its biggest customers.

The commission, along with its counterparts abroad and judges fashioning remedies in the public and private antitrust cases, might somehow get it right and fix the semiconductor market--or at least make it more efficient than it is under Intel's dominance. On the other hand, they might make things much worse.

The worst-case scenario seems increasingly likely. The FTC, in any event, is weighing in far too late on Intel's battles with AMD, and too soon in its fight with Nvidia and other GPU manufacturers. The remedies it intends to visit are breathtaking in their expansiveness and would leave Intel unable to compete, let alone compete fairly. The only beneficiaries of this latest chapter in the antitrust saga would be Intel's competitors, not consumers.

As Posner noted with characteristic understatement, an FTC untethered from its role of protecting consumers is little more than a tool for unhappy competitors. "If the competitor files a lawsuit, he must bear the expense of the suit," Posner wrote, "but if he can get the FTC to proceed against the seller, he incurs no cost. This opens up the possibility of using the FTC as a weapon against competition."

Even worse, it's a weapon that has the unfortunate habit of regularly backfiring on those who employ it.

Intel on Thursday previewed new Core processors and graphics technology that will become the pillar of its mainstream chip offerings.

As reported previously, Intel said it will roll out new Intel Core i processors on January 7 at the Consumer Electronics Show in Las Vegas, including the new i3 chip. These will be based on 32-nanometer technology for the first time. The smaller the geometry, the faster and more power-efficient the processor. Intel's main CPU processors are currently based on 45-nanometer technology.

Intel will introduce 17 new processors in all.

And the chipmaker restated the Core i series lineup. The i7 is its the top-of-the-line processor, the i5 is the midrange, and the new i3 will be the low end.

Intel also discussed its upcoming integrated graphics technology for laptops, which has been referred to as "Arrandale." This will be the first mainstream Intel laptop processor to integrate two processor cores and a graphics function in a single chip package, to deliver better overall power efficiency.

The graphics silicon is based on 45-nanometer technology for the first time, Intel said. The technology will also support Blu-ray playback, and Intel claimed that it is capable of "mainstream gaming."

Intel's integrated graphics chip technology is a focus of the Federal Trade Commission's complaint filed on Wednesday.

Intel is also moving its "Turbo Boost" technology into more Core i5. Turbo Boost speeds up and slows down individual cores to meet processing and power-efficiency needs, respectively.

The FTC wants Intel to grow up and start acting like a responsible company.

At least that's the goal behind the agency's lawsuit against the chipmaker. Filed on Wednesday, the FTC's suit charges Intel with a host of offenses, including using threats and rewards to convince PC makers not to buy chips from the competition, altering its compiler to weaken the performance of rival chips like those made by AMD, and preserving its CPU monopoly by stifling the market for GPUs (graphics processing units) made by Nvidia and other manufacturers.

On Wednesday, the FTC held a press conference in Washington in which it discussed why it launched the lawsuit now and what it hopes to gain.

Fielding questions from reporters, Richard Feinstein, director of the FTC's Bureau of Competition, explained that the allegations against Intel have been bubbling for the past 10 years. During that time, at each point in which Intel perceived a threat to its dominance, the company responded not by competing aggressively on its own merits but by behaving in a way that was exclusionary and detrimental to the competition and ultimately detrimental to consumers, said the FTC.

Federal officials said they chose now to file the suit in part because the allegations have continued and evolved over time, and also because many of the charges are fairly recent, such as Intel's perceived attacks on the GPU market.

Unlike other complainants against Intel, the FTC is not imposing any fines or financial penalties. Instead, the agency simply wants the company to try a little behavior modification. The government said it is looking for changes in Intel's conduct to help restore market competition.

In its complaint, the FTC provided a laundry list of remedies that it plans to impose on Intel if the company is found to have violated any laws.

The full list of 26 different dos and don'ts can be found in the FTC's complaint, but to name just a few:

• Intel can't directly or indirectly require customers to purchase only its CPUs or GPUs.
• Intel can't require a customer to buy a minimum or fixed number of processors from Intel.
• Intel can't withhold payments or other compensation to OEMs (original equipment manufacturers) just because the companies are not exclusively doing business with Intel.
• Intel can't directly price its processors so its customers pay below cost just to thwart the competition.
• Intel can't make hardware or software designed to inhibit processors made by competing companies.
• For customers who bought "defective" compilers, Intel must provide them with a working compiler at no cost and compensate them for the cost of recompiling their software using the new compiler.
• Intel can't coerce benchmarking organizations to adopt benchmarks that are deceptive or misleading.
• Intel must file periodic compliance reports with the FTC and for a period of time make available any advertisements, tests, reports, studies, and other documents that relate to the charges against it.

In charging Intel, Feinstein said that the FTC is relying on principles from Section 2 of the Sherman Act, which deals with monopolies, and Section 5 of the Federal Trade Commission Act, which covers deceptive or anticompetitive actions that affect consumers.

Section 5 also specifies that the outcome of the FTC's case can't be used to establish liability on Intel's part in any other antitrust actions. That may work in Intel's favor as its lawyers have certainly been putting in overtime dealing with the barrage of lawsuits against the company.

Intel recently closed the books on a 2004 antitrust lawsuit filed against it by AMD. As part of the settlement, the company agreed to pay its rival chipmaker $1.25 billion and promised to refrain from offering incentives to customers to keep them from doing business with AMD.

Intel is still appealing the record $1.45 billion fine imposed on it in May by the European Commission after the company was found guilty of violating European antitrust laws.

And in November, New York Attorney General Andrew Cuomo filed a federal lawsuit against Intel, accusing it of paying off computer makers like Dell with rebates to retain its monopoly and shove AMD out of the marketplace. Though this case is separate and distinct from the FTC's suit, Feinstein did acknowledge that he spoke to and compared notes with the state attorney general.

With Intel already facing severe financial penalties from these other lawsuits, Feinstein said he didn't feel another fine was essential for the FTC's case. But he said that in theory the FTC can go into federal court and seek financial penalties if necessary.

Last-minute allegations
In response to the FTC's action, Intel held its own conference call Wednesday in which the company discussed the allegations in greater detail..

Intel spokesperson Chuck Mulloy told CNET that substantial common ground had been reached in the discussions between the company and the FTC, especially after Intel settled its suit with AMD. But negotiations broke down because the commission raised certain last-minute allegations, such as the benchmarking issue and the GPU matter, and because Intel felt some of the suggested remedies were over the top.

Mulloy said that the benchmarking and GPU concerns had never been addressed in the two years that the FTC had been investigating Intel, both formally and informally, and were added a few weeks prior to the lawsuit being filed. He said the commission issued a subpoena to Intel requesting information on the GPU issue on December 8, about a week before the suit was launched, and did not wait for a response from Intel.

The chipmaker was also unhappy with a couple of the remedies proposed by the FTC. One sticking point in particular was the notion of compulsory licensing, in which the commission would have required Intel to license its x86 architecture to other companies, which includes those trying to make their own chips compatible with Intel processors. But Intel objected because it considers the technology to be its own intellectual property worth tens of billions of dollars.

Mulloy also said that talks broke down because Intel felt the FTC was trying to micromanage the company's pricing schemes--dictating how and under what circumstances it could offer discounts to certain customers. He added that Intel did make some proposals to the commission on discounting schemes, but this issue was never resolved.

Intel's view is that this is overreach on the part of the FTC, said Mulloy. He feels Intel was on track to settle and was disappointed that it couldn't get it done.

To move the case along quickly, the FTC decided to have it heard before an administrative judge rather than a slower federal court. The speedier process of the administrative court will begin with a trial in September, which Feinstein believes will conclude by the end of the year. Depending on the outcome, there may or may not be further proceedings before the FTC. But ultimately, the case would be reviewed by the FTC for a final decision. If the judge rules against Intel and the company appeals, that could take the case to the middle of 2011.

Ultimately, Feinstein believes that Intel's actions have deprived the marketplace of the vigorous competition it needs, affecting innovation, prices, and consumer choice. Despite the gains in the microprocessor market, Feinstein said he believes it's hard to know what the market might have done over the past 10 years had it not been for Intel's conduct.

Updated December 18, 5:45 a.m. PST with response from Intel

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Nvidia CEO Jen Hsun Huang issued an internal memo today to employees, calling the legal action by the Federal Trade Commission on Wednesday an event that could potentially "transform the computer industry."

The memo follows:

Hi everyone,

The U.S. government announced today that it has filed an antitrust lawsuit against Intel. This is an action the industry needs and one that consumers deserve. And it's one that can completely transform the computer industry.

The facts are clear. The FTC has charged that Intel has used its monopoly illegally to stifle innovation, to keep prices for their products inflated, and to unfairly block competitors. The FTC believes that millions of consumers have paid more and received less quality in return--and that companies and their employees have been forced out of markets where Intel has been threatened.

Nvidia CEO Jen Hsun Huang

Intel is fully aware that great graphics have become one of the most important features for consumer PCs, the fastest-growing segment of the PC market. Even more alarming to Intel is the revolutionary parallel computing technology in our GPUs that is being adopted by software developers across the world. The more successful we became, the bigger threat we were to Intel's monopoly. Instead of creating competitive GPU solutions and competing on the merits of their products, Intel has resorted to unlawful acts to stop us. The FTC announced today that this isn't acceptable.

Nothing this complicated gets decided quickly. It will take months for the FTC case to be heard by an administrative judge who will then recommend a ruling back to the FTC. And it's possible that this decision could be appealed. But today is a huge step forward for all of us that will begin to re-level the playing field.

Today's FTC announcement highlights the industry-changing impact of the GPU and the importance of our work. Our innovation is making the PC magical and amazing again. I can now imagine the day when Intel can no longer block consumers from enjoying our creation and experience computing in a way we know is possible.

Keep innovating...

Jensen

The Federal Trade Commission's complaint against Intel for alleged anticompetitive practices has a new twist: graphics chips.

To date, the antitrust actions of regulators worldwide toward Intel have focused on sale practices for central processing units, or CPUs, a market over which the company has fought heavily with Advanced Micro Devices. On Wednesday, however, the FTC spelled out a litany of allegations about Intel's alleged anticompetitive behavior in the market for graphics-processing units, or GPUs, in which Nvidia is a major player.

Nvidia is the world's leading supplier of "discrete," or standalone, graphics chips but takes a distant second place in overall market share to Intel, which supplies "integrated" graphics built into the chipsets that accompany all of its processors. Mercury Research estimates the total market for graphics chips, including integrated graphics, at almost $10 billion in 2009.

Why graphics, and why now? "It would be really hard to sell the public on expending resources to take Intel through administrative proceedings when it had already paid over a billion dollars to AMD," said Joshua D. Wright, a professor at George Mason University School of Law and a scholar in residence at the Federal Trade Commission until 2008.

"[The FTC] needed to be seen as doing something new," Wright said.

"[Nvidia] becomes the remaining star witness, now that AMD has left the field," said Roger Kay, principal at Endpoint Technologies. "And the FTC's focus, which begins to look toward the future, has to take into account how graphics will fit in as computer technology develops," Kay said.

Intel General Counsel Doug Melamed asserted in a statement that the FTC complaint "is based largely on claims that the FTC added at the last minute and has not investigated," referring to the GPU allegations. And Melamed added in a conference call that some of these GPU allegations were made as recently as December 8.

One of the areas the FTC case zeroes in on is the burgeoning competition for chipsets in Netbooks--small, inexpensive laptops that are typically priced around $350. Netbooks are powered by Intel's Atom processor--and integrated graphics silicon built into the chipset. In this market, Nvidia also sells its Ion chipset, which competes with Intel's integrated graphics product.

... Read more

The Federal Trade Commission announced Wednesday that it is suing Intel, claiming that the chip giant has illegally used its dominance to stymie competition and to strengthen its own monopoly.

In so doing, says the FTC, the company has robbed consumers of both choice and innovation in microprocessors, including those that outshone Intel's own: "Intel's anticompetitive tactics were designed to put the brakes on superior competitive products that threatened its monopoly in the CPU microchip market."

The agency's complaint alleges that Intel used a series of threats and rewards to convince top PC makers such as Dell, Hewlett-Packard, and IBM to not purchase computer chips from the competition. Intel also allegedly prevented computer manufacturers from marketing PCs with non-Intel processors.

In addition, the FTC contends that Intel secretly revamped its compiler to slow the performance of rival chips and simply told its customers that the software performed better on its own chips than on those of the competition.

"Intel has engaged in a deliberate campaign to hamstring competitive threats to its monopoly," said Richard A. Feinstein, director of the FTC's Bureau of Competition, in a statement. "It's been running roughshod over the principles of fair play and the laws protecting competition on the merits. The Commission's action today seeks to remedy the damage that Intel has done to competition, innovation, and, ultimately, the American consumer."

Intel responded Wednesday morning with a vigorous rebuttal, calling the FTC case "misguided" and ill-informed.

Intel has competed fairly and lawfully. Its actions have benefitted consumers. The highly competitive microprocessor industry, of which Intel is a key part, has kept innovation robust and prices declining at a faster rate than any other industry. The FTC's case is misguided. It is based largely on claims that the FTC added at the last minute and has not investigated. In addition, it is explicitly not based on existing law but is instead intended to make new rules for regulating business conduct. These new rules would harm consumers by reducing innovation and raising prices.

The chipmaker added that case should have been settled, not sent into litigation.

"Settlement talks had progressed very far but stalled when the FTC insisted on unprecedented remedies--including the restrictions on lawful price competition and enforcement of intellectual property rights set forth in the complaint--that would make it impossible for Intel to conduct business," Doug Melamed, Intel's newly appointed general counsel, said in a statement.

The FTC is now seeking an order to prevent Intel from using threats, bundled prices, or other offers to strike exclusive deals, shut out competition, or manipulate the prices of its chips. The regulatory agency is also considering an order that would prohibit Intel from stifling the sale of competitive chips or from making products to weaken their performance.

Past cases focused on Intel, Advanced Micro Devices, and central processing units (CPUs), but the FTC case adds a new element--graphical processing units, such as those from chipmaker Nvidia.

"Intel allegedly once again finds itself falling behind the competition--this time in the critical market for graphics processing units, commonly known as GPUs, as well as some other related markets. These products have lessened the need for CPUs, and therefore pose a threat to Intel's monopoly power. Intel has responded to this competitive challenge by embarking on a similar anticompetitive strategy, which aims to preserve its CPU monopoly by smothering potential competition from GPU chips such as those made by Nvidia," the FTC said in its statement. "As part of this latest campaign, Intel misled and deceived potential competitors in order to protect its monopoly. The complaint alleges that there also is a dangerous probability that Intel's unfair methods of competition could allow it to extend its monopoly into the GPU chip markets."

In November, Intel settled its antitrust dispute with AMD, in a deal that includes a $1.25 billion payment to AMD.

Updated at 7:55 a.m. PDT with FTC statement on graphical processing units and with Intel's response to the FTC lawsuit.