March 8, 2005 9:32 AM PST

Japan antitrust watchdog bites Intel

Intel is mulling a response to a ruling by Japan's antitrust watchdog that it used unfair business practices in the country.

The Fair Trade Commission, in a warning against Intel's Japan unit on Tuesday, said the chipmaker attempted to stifle competition in Japan by offering rebates to Japanese PC makers if they agreed to limit their use of others' processors.

Intel immediately disputed the warning, which came with no monetary penalty. The company is required to formally respond by March 18 to three recommendations issued by the FTC, a representative from the agency said.

The FTC's recommendations include calling for Intel to cease and desist activities such as offering favorable prices to companies that agree not to use or to limit their use of others' processors. Although they don't carry any fines, the recommendations could ultimately direct Intel to change some of its procedures in Japan to satisfy the government there.

The agency's warning was the second against a U.S.-based computer industry giant. It issued a similar warning against Microsoft last summer, which the software giant appealed.

"We'll be evaluating the recommendation in terms of the underlying facts and proposed cease and desist order," said Chuck Mulloy, an Intel spokesman. "We are faced with an evaluation we have to undertake, and we have to do that fairly quickly."

Intel said Japan has failed to take into account generally accepted principals of antitrust law, including evaluations of economic impact and the effect on customers.

"There has been no in-depth analysis by the FTC to look into that," Mulloy said. "That's a concern to us."

Advanced Micro Devices, on the other hand, supports the ruling.

The FTC "found that Intel illegally manipulated the market to exclude competition, hurting PC users around the world," Thomas M. McCoy, executive vice president of legal affairs at AMD, said in a statement. "Using market power illegally to limit innovation and, more importantly, consumers' freedom to choose, cannot be tolerated. We encourage governments around the globe to ensure that their markets are not being harmed as well."

The FTC said the Intel Japan unit stifled competition by offering rebates to five Japanese PC makers, including NEC, Toshiba, Hitachi, Sony and Fujitsu, which agreed to not buy or to limit their purchases of chips made by AMD and Transmeta.

The agency said such practices had been ongoing since May 2002 after the inflow of low-priced PCs into Japan heated up competition in

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