Chips are down as Intel sued in US

The US Federal Trade Commission sued Intel yesterday, looking to block pricing deals and other tactics the government said the world's biggest chip maker has used to snuff out competition.

The FTC said Intel, which makes the microprocessors that run personal computers, has shut rivals out of the marketplace.

In the process, the FTC said, Intel has deprived consumers of choice and stifled innovation in the chip industry.

In a statement, the agency said it is asking for an order that would bar Intel from using "threats, bundled prices, or other offers to encourage exclusive deals, hamper competition, or unfairly manipulate the prices of its" chips.

Intel called the complaint "misguided." The company accused the agency of rushing the lawsuit without fully investigating the charges and of basing its case on new rules rather than existing statutes. "Intel has competed fairly and lawfully," Intel said in a statement.

Intel has faced similar charges for years and has denied any wrongdoing. The lawsuit comes after a recent $1.25 billion (£745 million) settlement with rival Advanced Micro Devices over similar claims.

In AMD's lawsuit, a Toshiba manager compared Intel's financial incentives for not working with the competition to cocaine, and Gateway executives said Intel beat them "into guacamole" with threats against working with AMD.

Intel, which is based in Santa Clara, California, is also appealing a record $1.45 billion (£899 million) antitrust fine levelled by European regulators.

Intel shares fell 37 cents, or 1.9 per cent, to $19.43 in morning trading, while AMD jumped 43 cents, or 4.9 per cent, to $9.25.

In its complaint Wednesday, which was scheduled to be heard in September by an administrative law judge, the FTC said Intel has used both threats and rewards to keep some of the biggest computer makers from buying other companies' chips or marketing computers that carried them. The complaint names Dell, Hewlett-Packard, and IBM as Intel's targets.

The FTC also said Intel has secretly redesigned critical computer software to hinder the performance of other companies' microprocessors, or CPUs.

Although the FTC does not ask for any specific damages in its lawsuit, it wants to force Intel to provide its customers with a substitute software at no additional charge and to compensate them for the cost of distributing the replacement.

In addition, the agency said Intel is looking to extend its dominance into chips that are used to processes graphics, commonly known as GPUs, an area where Intel faces competition from smaller rivals such Nvidia.

"Intel has engaged in a deliberate campaign to hamstring competitive threats to its monopoly," said Richard A. Feinstein, director of the FTC's Bureau of Competition. "It's been running roughshod over the principles of fair play and the laws protecting competition on the merits."