March 8, 2005 9:32 AM PST

Japan antitrust watchdog bites Intel

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the domestic market and prompted Japanese PC makers to turn increasingly to AMD and Transmeta chips, which were typically offered for less money than Intel products.

The share of Intel's central processing units in the Japanese PC market rose to 87 percent in 2004 from 73.2 percent in 2002, while AMD's share was halved to 10.4 percent over the same period, according to data from research firm Gartner.

"In this case, a company with a dominant market position squeezed out rivals by doing business with the five major PC makers on condition of not using competitors' chips," an FTC official told reporters.

The agency began its investigation last April, when it launched a raid on three Intel offices, confiscating documents and interviewing employees. That was followed up with a questionnaire sent to several companies in the summer, according to a source familiar with the Japanese investigation.

"It included nearly a dozen questions and was a broad inquiry on the industry's sales practices and industry data," the source said.

If Intel challenges the agency's warning, the matter will be reviewed by a court-like body set up by the FTC. If the chipmaker is dissatisfied with those results, it can appeal to a high court.

Still, one analyst said the ruling might not change much for Intel.

"Generally, Intel is pretty careful not to engage in these kinds of anticompetitive acts," said Martin Reynolds, an analyst at Gartner. "It could be something as simple as a field office pushing too hard."

So far, "the market share between Intel and AMD remains relatively constant and is largely related to manufacturing capacity," Reynolds said.

Domino effect?
The agency's actions could lead to similar moves by regulatory bodies around the world. Shortly after Japan launched its investigation, European antitrust regulators confirmed that they, too, are investigating Intel for possible antitrust violations.

"We are cooperating with the Japan FTC and have our own inquiry too," said a spokeswoman with the European Commission, an antitrust regulatory body with the European Union. She declined to elaborate at what stage the investigation has reached.

Intel, however, downplayed the EC investigation, saying it has been ongoing for three years.

"That's really not new," Mulloy said. "We're continuing to cooperate with them...and have been for years. We think, at the end of the day, as they analyze the market and the impact on consumers...they'll conclude our behavior has been fair and lawful."

The U.S. Federal Trade Commission was not immediately available for comment.

Reuters contributed to this report.

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