Intel follows Gates into monopoly court

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The Independent Online
THE US GOVERNMENT begins a key competition case this week against Intel, the chip maker that, along with software giant Microsoft, dominates the computer market.

Washington contends, as it does with Microsoft, that Intel used its market strength to edge out competitors. The two - known collectively as `Wintel' - dominate 80 per cent of the world's computer market.

Unlike the Microsoft trial, currently in recess, the Intel trial is being held before an Administrative Law Judge of the Federal Trade Commission. The trial starts on Tuesday and is likely to last two or three months. It could be appealed to the FTC commissioners and then to federal appeals court.

The FTC has not lost a major case for some time. But it seems to be on weaker ground with Intel, and the eight months it has taken to bring the case to court have not helped as technology and markets change so fast.

The FTC says that Intel "coerced major, established customers into granting access to their technology on terms favourable to Intel." The government says Intel demanded royalty-free use of patents owned by Intergraph, Compaq and Digital Equipment Corp, three of its customers, intending to use the data to improve its own products.

When they refused, it threatened to stop providing them with information about its chips, the government says. That information is crucial in allowing the companies to prepare for the next generation of chips as they design computers.

Intel's defence rests less on a complete denial of the government argument that it dominates the market, and more on its right to do business with anyone it wants. "We were simply protecting our intellectual property rights," said Chuck Mulloy, Intel spokesman. The companies were, after all, taking legal action against Intel, he said.

Intel has in any case lost market share in the past year. Advanced Micro Devices may in January have sold more retail PC processor units than Intel for the first time, an indicator of the company's slipping grasp, although the company remains dominant in the mid-range market, the most lucrative slice.

None of the companies was directly in competition with Intel, and lawyers in Washington think the government will find it hard to prove its case on the basis of monopoly. Intel said in its pre-trial brief that there was "overwhelming evidence that competition is thriving".

Although it involves some important principles about intellectual property and the nature of client relationships, the Intel trial is unlikely to generate the same excitement as Microsoft's mammoth case. It is focused on a far narrower set of arguments and relationships. There will be less use of e-mails to demonstrate internal company policy, and Andrew Grove, Intel's chairman, is a smoother customer than Mr Gates. Both the government and Intel will bring academic experts to discuss whether or not Intel has a monopoly, but this will probably be a less hard-fought argument than in the Microsoft trial.

The relationship between Intel and Microsoft, once very close, is also more distant now. Intel's evidence in the Microsoft trial probably harmed the company, and it has sought to compete with Microsoft in the market for consumer video.