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Intel and the Death of U.S. Antitrust Law

Keith Hylton, Feb 28, 2010

The Federal Trade Commission’s (“FTC’s”) new legal attack on Intel threatens to leave the company a shell of its former self. The Commission claims that Intel violated Section 5 of the FTC Act by giving discounts and rebates to customers in a manner that harmed its main rival AMD, by designing its products in a way that disadvantages rivals, and acting too aggressively in protecting its intellectual property. The remedies the FTC is seeking would impose broad restrictions on pricing, product design, and protection of intellectual property.

The FTC’s claims are not well founded in U.S. antitrust law, though they have been embraced in the European Union. Unlike the European Commission, the FTC has to go to court and prove its claims, and will have to do so against a background of U.S. case law that ranges from wary to hostile to its theories. The U.S. courts have been reluctant to use antitrust law to micro-regulate pricing and product design decisions, and to interfere with the protection of intellectual property. The FTC’s likelihood of victory, after all of the dust kicked up in the litigation process has settled, is low. So one has to wonder what’s behind this enforcement action.

The most likely reason is that the FTC is hoping for a settlement with Intel that will result in the imposition of at least some of its proposed restrictions. The agency will then be able to claim that it has enhanced the regulatory power of antitrust law, and effectively moved the law to a position closer to that in the European Union. In the meantime, the law on the books will not have changed a bit. The FTC expects to prove that by threatening litigation based on theories that are outside of the law, the agency can effectively impose regulations on firms that are also outside of the established law.

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