FTC Charges Intel with Anticompetitive Tactics

By Michael Feldman

December 16, 2009

Intel is back in hot water with government regulators. On Wednesday, the US Federal Trade Commission (FTC) filed a lawsuit against Intel, bringing new allegations against the chipmaker. This comes just a month after Intel reached a settlement with Advanced Micro Devices regarding AMD’s long-standing antitrust and patent complaint. The settlement resulted in a $1.25 billion payment to AMD by its larger rival.

According to the press release issued by the Federal Trade Commission:

The FTC’s administrative complaint charges that Intel carried out its anticompetitive campaign using threats and rewards aimed at the world’s largest computer manufacturers, including Dell, Hewlett-Packard, and IBM, to coerce them not to buy rival computer CPU chips. Intel also used this practice, known as exclusive or restrictive dealing, to prevent computer makers from marketing any machines with non-Intel computer chips.

These allegations are nearly identical to the ones brought by European Union regulators, which resulted in Intel being fined a record $1.45 billion (which Intel is currently appealing). What’s new in the FTC suit is the charge of unfair practices regarding the GPU business:

Having succeeded in slowing adoption of competing CPU chips over the past decade until it could catch up to competitors like Advanced Micro Devices, Intel allegedly once again finds itself falling behind the competition — this time in the critical market for graphics processing units, commonly known as GPUs, as well as some other related markets. These products have lessened the need for CPUs, and therefore pose a threat to Intel’s monopoly power.

This charge stems from NVIDIA’s complaint that Intel is using unfair bundling practices with its in-house integrated graphics chips to undercut the competitiveness of third-party GPUs on consumer platforms. As you might imagine, NVIDIA is cheering on the FTC action. On the company’s blog site today, CEO Jen-Hsun Huang released this statement:

“We support today’s action by the FTC, which has fully recognized Intel’s behavior as an impediment to progress in the computer industry and to consumer choice.

As the FTC states, when Intel fell behind in innovation within its core CPU market, it moved to smother competition in the GPU marketplace. This has curbed innovation and investment, and reduced consumer choice.

The GPU is critical for common applications like graphics, video and photo processing. Today’s filing is sorely needed to stop Intel from using unlawful tactics to lock out the GPU and block consumers from its revolutionary benefits.”

A third allegation by the FTC, which is of special interest to HPC users, is directed at Intel’s x86 compiler:

In addition, allegedly, Intel secretly redesigned key software, known as a compiler, in a way that deliberately stunted the performance of competitors’ CPU chips. Intel told its customers and the public that software performed better on Intel CPUs than on competitors’ CPUs, but the company deceived them by failing to disclose that these differences were due largely or entirely to Intel’s compiler design.

This harkens back to one of the original allegations in AMD’s 2005 civil antitrust complaint, which claimed Intel was using its x86 compiler technology to tip the playing field in favor of its own silicon. It specifically relates to the way the Intel compiler generates code for floating point and vector operations. From the AMD complaint:

Intel has designed its compiler purposely to degrade performance when a program is run on an AMD platform. To achieve this, Intel designed the compiler to compile code along several alternate code paths. Some paths are executed when the program runs on an Intel platform and others are executed when the program is operated on a computer with an AMD microprocessor…. By design, the code paths were not created equally. If the program detects a “Genuine Intel” microprocessor, it executes a fully optimized code path and operates with the maximum efficiency. However, if the program detects an “Authentic AMD” microprocessor, it executes a different code path that will degrade the program’s performance or cause it to crash….

ISVs are forced to choose between Intel’s compilers, which degrade the performance of their software when operated with AMD microprocessors, or third-party compilers, which do not contain Intel’s particular optimizations. Sadly for AMD and its customers, for legitimate reasons Intel’s compilers appeal to certain groups of ISVs, especially those developing software programs that rely heavily on floating point and vectorized math calculations. Unbeknownst to them, performance of their programs is degraded when run on an AMD microprocessor not because of design deficiencies on the part of AMD, but deviousness on the part of Intel.

The allegation seems like it would be especially difficult to prove since evidence would need to be produced that Intel explicitly jury-rigged the compiler to produce suboptimal code for the AMD target. Poor compiler performance alone, due to unfamiliarity with AMD hardware or poor coding, would not be enough. In any case, since AMD has settled with Intel, it can no longer pursue damages based on this claim, but apparently the FTC thinks it is worth pursuing on its own.

According to the FTC, the agency is not seeking monetary damages. Rather it is interested in remedying the chipmaker’s behavior. Intel, of course, claims its behavior is fine the way it is. In a prepared statement, Intel’s senior vice president and general counsel Doug Melamed said: “This case could have, and should have, been settled. Settlement talks had progressed very far but stalled when the FTC insisted on unprecedented remedies — including the restrictions on lawful price competition and enforcement of intellectual property rights set forth in the complaint — that would make it impossible for Intel to conduct business.”

The case is set to go before an FTC administrative judge in September 2010.

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