Intel milieu spurs talk on fed probe, P6 date

Electronic News, Nov 14, 1994 by Jim DeTar

MOUNTAIN VIEW, CALIF.-Intel's powerful presence and influence over semiconductor and systems businesses continues to feed a regular stream of industry-wide reports and rumors ranging from technical minutia to cosmic strategy. A common thread, however, is strewn throughout the discourse - the company's weakening of older product markets, control of currently-hot markets and creation of market overhang with new products.

And the Intel scuttlebutt intensified again last week as reports surfaced that Santa Clara, Calif.-based Intel may be investigated again by the Federal Trade Commission, or possibly the Justice Department's Antitrust Division, on

product tactics. At the same time, rumors swirled around Intel regarding the introduction date of its next-generation x86 processor, code-named P6, which has not even been formally introduced yet.

Intel responded on both of these somewhat inter-related fronts. On the potential government inquiries, intel said it has has no knowledge whatsoever. Meanwhile, on some industry reports suggesting Intel an is moving up the P6 product's introduction date, the company confirmed the P6 will begin sampling in 1Q95 but denied this was any acceleration of the introduction.

The Justice Department's Antitrust Division in recent years has asserted itself strongly in the computer industry. Last year, for example, it picked up from the FTC a case regarding alleged monopolization by Microsoft.

The FTC and Antitrust are reportedly vying for the right to open the investigation of Intel for allegedly "tying" the sale of its MPUs to other products. Washington sources said that normally this type of jurisdictional dispute would be settled at some level below the assistant attorney general and the chairman of the commission. "When they are really fighting hard - which is a very occasional matter - those two have to get together and try and agree," one contact stated.

Sources said FTC chairwoman Janet D. Steiger and assistant attorney general Anne K. Bingaman will likely have to negotiate the matter and a decision could come as early as this week.

An Intel spokesman said the company is unaware of any impending investigation, and could cite no reason why the FTC might once again investigate the company's business practices. "We have received no notification of an investigation by the FTC. We heard from the FTC last year, and at that time they closed the investigation that began in 1991," the spokesman said.

The investigation of Intel's business practices by the FTC that began in 1991 (EN, July 8, 1991) initially focused on the company's failed second-source agreement with Advanced Micro Devices, in which Intel was found by an arbitrator the previous year to have breached its contract. If the FTC had found Intel deliberately sabotaged the AMD pact in order to create a monopoly for itself with its x86 microprocessor, it could have provided the grounds for an antitrust action by Justice. The investigation also looked into whether Intel was allegedly tying purchases of its x86 processors.

An FTC tying inquiry looks into charges that a manufacturer has used a much-demanded product which has market power to induce the sale of a product which the customer may not want. Justice itself looks at potential antitrust implications based on such factors as a monopolist controlling market entry by outsiders, controlling distribution and/or controlling prices.

Last year, the FTC notified intel it had dropped the unfair competition investigation of the company (EN, July 19, 1993). The FTC letter to the company noted it had been investigating Intel on several fronts, including alleged unlawful tying and exclusive dealing schemes and its sales and marketing strategies with respect to MPUs, math co-processors and other devices.

The FTC said upon completion of its investigation, "it now appears that no further action is warranted by the commission at this time. Accordingly, pursuant to authority delegated by the commission . . . the investigation has been closed." However, the letter left open the option to reopen the investigation at a later date, saying the commission's action "is not to be construed as a determination that a violation may not have occurred" and the FTC "reserves the right to take such further action as the public interest might require."

A source close to Intel was "mystified" by any recent FTC development because the company has a strong program in place to avoid putting itself in jeopardy of an antitrust investigation. "Intel had a strong compliance program which covered this subject quite extensively. Sales people were taught to not to engage in this practice and warned they would be terminated. The success of the compliance program led the commission to conclude there was not a tying problem," the source said.

Intel VP and general counsel F. Thomas Dunlap said when the FTC initiated its first investigation in 1991, the company was not completely caught off guard by the suspicion of antitrust violation. "I recognized this as a potential problem as far back as when I started at Intel in 1974," Mr. Dunlap said. "We've always had an antitrust compliance program, and as the success of our products grew, we stepped up the training."