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FTC's Antitrust Case Against Intel: A Nuanced View of Monopoly Power

Strategic Insights

— 1 min read

The Federal Trade Commission's case against Intel, set to go to trial next month, is a peculiar antitrust lawsuit that focuses on alleged mistreatment of customers rather than rivals. The commission argues that Intel, which sells about 80 percent of general-purpose microprocessors, used its power to coerce three manufacturers - Compaq, Intergraph, and Digital Equipment - into surrendering patent rights in exchange for proprietary information. However, Intel's customers were not competitors, and the commission has not provided evidence of harm to competition or innovation.

Key Takeaways:

  • The FTC's case against Intel is a novel application of antitrust principles, which may set a new precedent for future cases.
  • The commission's claim focuses on Intel's alleged mistreatment of customers rather than rivals, a departure from traditional antitrust cases.
  • Intel admits to using hardball tactics to withhold proprietary information from three manufacturers, but argues that its customers were not competitors and that its actions reduced consumer prices.
  • The commission's theory relies on the idea that Intel's behavior could discourage other companies from competing with it in the future.
  • Intellectual property law experts question the commission's assertion that Intel's actions diminished innovation in the market.

Statistics:

  • Intel sells approximately 80 percent of general-purpose microprocessors.
  • The FTC's case focuses on three manufacturers - Compaq, Intergraph, and Digital Equipment - who were allegedly mistreated by Intel.
  • Intel's competitors in the production of microprocessors - Advanced Micro Devices, National Semiconductor's Cyrix unit, and I.B.M. - are not customers for its chips and do not get its prerelease information.
  • The commission admits that there was little direct competition between the three computer manufacturers and Intel.

Sources:

  • "Aftershocks: Production, Distribution, and the Restructuring of the Enterprise" economic policy seminar at the Levy Economics Institute, Bard College (1982).

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