In the long-running saga of Intel’s conflicts with various national trade commissions, 2009 was a lousy year for Intel. The European Commission fined Intel for nearly 1.5 billion USD, the US Federal Trade Commission sued Intel on anti-trust grounds, and Intel settled with AMD for another 1.25 billion USD. If nothing else it was an expensive year, and while Intel settling with AMD was a significant milestone for the company it was not the end of their troubles.

Now just shy of 9 months after the FTC’s lawsuit began, Intel’s conflicts are starting to come to an end. While the European Commission’s fine is still on appeal, Intel can close the book on their troubles with the FTC: Intel and the FTC have reached a settlement ahead of what would have been next month’s court hearing. With this settlement the FTC is agreeing to drop the case in return for a series of prohibitions and requirements placed upon Intel to maintain and enhance the competitive environment in the CPU and GPU markets. However true to their word, the FTC did not push for any fines – this is a settlement of actions, and not one of greenbacks.

Background

As a quick refresher, the FTC had been investigating Intel for a number of years. Ahead of their suit in December of 2009 the FTC brought Intel to the table and tried to negotiate a settlement, but that didn’t come to pass. In the meantime Intel and AMD reached a separate truce back in November of 2009, an important distinction as AMD had been the primary instigator of all of the investigations against Intel. Ultimately the FTC decided to take their case forward without further help from AMD, a somewhat surprising move that at first glance seems to have largely panned out in the FTC’s favor.

In the suit, the FTC listed a number of complaints towards Intel over both the CPU and the GPU markets, where in the former Intel is the dominant player, and in the latter their market share has been increasing over the years as IGPs grow in popularity. The FTC’s complaints were roughly as follows:

CPU

  1. The usual complaints we’ve seen from the EU. Intel rewarded OEMs to not use AMD’s processors through various means, such as volume discounts, withholding advertising & R&D money, and threatening OEMs with a low-priority during CPU shortages.
  2. Intel reworked their compiler to put AMD CPUs at a disadvantage. For a time Intel’s compiler would not enable SSE/SSE2 codepaths on non-Intel CPUs, our assumption is that this is the specific complaint. To our knowledge this has been resolved for quite some time now.
  3. Intel paid/coerced software and hardware vendors to not support or to limit their support for AMD CPUs. This includes having vendors label their wares as Intel compatible, but not AMD compatible.
  4. False advertising. This includes hiding the compiler changes from developers, misrepresenting benchmark results (such as BAPCo Sysmark) that changed due to those compiler changes, and general misrepresentation of benchmarks as being “real world” when they are not.


The GeForce 9400M: Intel's chief competitor in the Core 2 integrated graphics market and a threatened product line

GPU

  1. Intel eliminated the future threat of NVIDIA’s chipset business by refusing to license the latest version of the DMI bus (the bus that connects the Northbridge to the Southbridge) and the QPI bus (the bus that connects Nehalem processors to the X58 Northbridge) to NVIDIA, which prevents them from offering a chipset for Nehalem-generation CPUs.
  2. Intel “created several interoperability problems” with discrete CPUs, specifically to attack GPGPU functionality. We’re actually not sure what this means, it may be a complaint based on the fact that Lynnfield only offers single PCIe x16 connection coming from the CPU, which wouldn’t be enough to fully feed two high-end GPUs.
  3. Intel has attempted to harm GPGPU functionality by developing Larrabee. This includes lying about the state of Larrabee hardware and software, and making disparaging remarks about non-Intel development tools.
  4. In bundling CPUs with IGP chipsets, Intel is selling them at below-cost to drive out competition. Given Intel’s margins, we find this one questionable. Below-cost would have to be extremely cheap.
  5. Intel priced Atom CPUs higher if they were not used with an Intel IGP chipset.
  6. All of this has enhanced Intel’s CPU monopoly.

The purpose of the suit and what would have been the associated trial would have been for the FTC to prove that Intel engaged in these actions, and more importantly that these actions were harmful to the market to a significant enough degree to run afoul of Section 5 of the FTC Act.

One other piece of more recent background information involves Dell. Dell has been under investigation by the US Securities & Exchange Commission for the past few years regarding financial irregularities. Those irregularities, as the SEC charges, were due to Intel’s secret rebates to the OEM to not use AMD processors. When Dell began using AMD processors in 2007 and those rebates stopped, Dell ceased to turn a profit.

In turn, since these payments were secret, investors had no idea that the only reason the company was profitable was due to these payments as opposed to entirely above-the-board measures by the company. The end result was that the SEC sued Dell, and last month Dell settled the case by paying a $100 million fine to the SEC. As is the case with similar settlements, the case is not legally binding proof of Intel’s actions, as Dell neither had to confirm nor deny the SEC’s charges (in essence allowing them to claim that the settlement is just the easiest way to get the SEC out of the way). It does however show us just how large Intel’s rebates to OEMs may have been.

The Settlement
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  • Hector2 - Friday, August 06, 2010 - link

    I agree that it's hard to believe that Intel sells below costs. In fact, to be more plain, I just don't believe it. Intel's margins have been >50%. Even AMD's margins had been >40%. To sell below cost, especially for the tiny Atom when wafer costs are fixed, would mean selling it for <$10, I think. It's a lot smaller than standard CPUs. Chipsets are even cheaper than CPUs. The accusations (from NVidia) that Intel is selling some Atoms below cost are ridiculous Reply
  • AmdInside - Friday, August 06, 2010 - link

    The point I believe is that Intel is giving away their chipsets essentially by selling them at below cost in order to move much higher margin CPUs. So NVIDIA can't complete with Intel because Intel is giving OEMs super cheap chipsets and NVIDIA doesn't have a CPU to bundle with. And as for Atom, Intel charges more for an Atom processor alone than it does for an Atom + chipset bundle. Reply
  • Calidore - Friday, August 06, 2010 - link

    How many copies of gcc can you buy for $10 million?

    If AMD doesn't want to create their own compiler, maybe they could contribute tweaks to gcc, thus creating an AMD-friendly compiler that, unlike Intel's, is also free.
    Reply
  • Quantumboredom - Friday, August 06, 2010 - link

    AMD does have it's own compiler (a version of the Open64 compile), they just haven't bothered to support it on Windows yet.

    They currently have a poll where Windows support is on the list though, here: http://developer.amd.com/cpu/open64/Pages/default....
    Reply
  • Roy2001 - Friday, August 06, 2010 - link

    My whole feeling is, when AMD/Nvidia cannot compete with Intel, FTC steps in to help.

    Is there anything Intel did illegal? If it is, then we need to regulate many,. virtual all business area. When I was trying to find a guy to mow the lawn, the one mowering my neighbours told me that he could offer the service at a lower price since he will work on two house. It would be even lower if the whole street (8 families) switch to him.

    When I tried to find a contractor to do wood floor and tile, the 2nd guy I interviewed said he can give me 15% discount if he got both jobs.

    Do you think these practices are illegal?
    Reply
  • HolKann - Sunday, August 08, 2010 - link

    Perhaps you're not fully grasping the details of market functionality. Let me explain it this way - keeping in tune with the lawn mower analogy: You have 10 lawns, and each of them is a bit peculiar and requires a slightly different approach. Intel comes up to you and says: "I can do 9 of them, at a very good price, only if you don't let AMD do the 10th one, which I'm unable to mown. If you do let AMD do the tenth one, you'll pay double to me." Intel is frightened you'll like AMD, because then you might let AMD do the 4 lawns it offers you to do, leaving only 6 to Intel in the future. Ofcourse, this situation is not optimal, like say, let AMD do 2 lawns and Intel 8, having all lawns mown. No, in this situation one lawn will never be mown, because it can only be done by AMD.

    Each lawn is a market niche, and the lawns AMD can do better are for instance the "chipset+gpu+cpu" market, or the "cheap-ass quad core" market, or the "bang 4 bucks" market, or simply the "AMD-fanboy/Intel haters" market (which Intel will never be able to address). However, Intel abuses it's monopoly, because it forces OEM's to choose between Intel OR amd, while oem's would rather like Intel AND amd. And ofcourse, OEM's will choose Intel over AMD, because Intel has a de facto monopoly.

    There's nothing wrong with offering discounts on large volumes, but there's something wrong with offering discounts to not sell other brands.
    Reply
  • Wurmer - Monday, August 09, 2010 - link

    ''There's nothing wrong with offering discounts on large volumes, but there's something wrong with offering discounts to not sell other brands.''

    Indeed, couldn't agree more. I have both Intel and AMD machines and I like it that way, competition is good far all of us.
    Reply
  • softdrinkviking - Saturday, August 07, 2010 - link

    i noticed that intel closed their online store that sells their C++ compiler as of "JUNE 30th, 2010." hahaha. i wonder if this has anything to do with the new customer reimbursement fund?

    http://software.intel.com/en-us/articles/intel-sof...
    Reply
  • softdrinkviking - Saturday, August 07, 2010 - link

    http://software.intel.com/en-us/articles/buy-or-re... Reply
  • softdrinkviking - Saturday, August 07, 2010 - link

    it was fun to read the comments from this 2003 article for the Athlon 64!

    http://www.anandtech.com/show/1164/17

    I wonder what would have happened if Intel had not (allegedly) paid off the OEMs to shut AMD out of the business?

    The 64 VS 32 compiling benchmark is especially interesting since we are just now seeing a wider adaptation of 64 bit OSs.
    Reply

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