Intel’s Response

Intel wasted no time in responding to the FTC’s suit. In their response, Intel has denied the accusations, and insisted that they have competed “fairly and lawfully,” noting that prices (ASPs) have been declining at a rate faster than any other industry.

Of particular note in Intel’s response is their claim that the FTC’s case “is based largely on claims that the FTC added at the last minute and has not investigated.” This we’re assuming means all of the GPU-related claims. You can read into this several ways, but our take is that Intel is more concerned with the GPU-related claims than the CPU-related claims at this moment.

Finally, Intel is understandably annoyed that this even reached the lawsuit stage. As we mentioned before Intel was already in settlement talks with the FTC, and believes that the issue should have been resolved there. In the failure of these talks, Intel has cited that the FTC “insisted on unprecedented remedies – including the restrictions on lawful price competition and enforcement of intellectual property rights set forth in the complaint.” As the FTC would not back down on their requested remedies and Intel would not accept them, this is what has lead to the case moving on to a lawsuit.

What the FTC Wants

So what does the FTC want? For one thing, not money. In their claims and requested remedies, they have not asked for any kind of fine, but rather are focusing exclusively on enforcing changes in the way Intel conducts business. This means their remedies are entirely corrective, rather than being a mix of corrective and punitive remedies such as what the EU has gone for.


What the FTC wants for Christmas: For Intel to license DMI

For their corrective remedies, here is what the FTC wants:

  1. For Intel to stop doing all of the things mentioned above.
  2. Intel cannot require OEMs to purchase only Intel CPUs and GPUs, purchase them in specific quantities, or to not purchase competitors GPUs and CPUs. This is effectively a stab at the rebates Intel has been offering for bulk purchasing, and the advertising help Intel has been offering to bulk purchasers.
  3. To stop prioritizing CPU shipments to loyal OEMs.
  4. To stop withholding technical support from disloyal OEMs.
  5. For Intel to be disallowed from producing/distributing any software or hardware that unreasonably excludes or inhibits the performance of competitors’ GPUs and CPUs.
  6. To stop selling things below cost. The FTC is defining this as being the average variable cost plus a “contribution to Intel’s fixed sunk costs in an appropriate multiple of that average variable cost.”
  7. For Intel to do a few different things about the versions of their compiler that put AMD at a disadvantage (which the FTC is calling the Defective Compiler): offer a substitute compiler to customers for free that is not a Defective Compiler, or to compensate customers in switching to another compiler, to provide notice to software buyers of products compiled using the Defective Compiler that they may need to replace their software.
  8. To stop Intel from making misleading statements.
  9. To prevent Intel from coercing benchmark organizations into adopting misleading benchmarks.
  10. For Intel to license the QPI and DMI buses to 3rd party chipset manufacturers.
  11. For Intel to not block the Global Foundries deal (AMD and Intel already settled this) or any similar deal that VIA might make.
  12. For Intel to stop badmouthing competing products unless they have solid scientific evidence.
  13. For Intel to foot the bill for the independent organization that will monitor this.

It’s a long list, but there’s nothing in it that’s particularly surprising. The FTC’s ultimate goal is to get Intel to stop engaging in all of the anti-competitive actions they have been engaging in for the last decade, and to have them directly monitored for an indefinite period of time in the future to make sure they do not resume these actions.

On an interesting note, the FTC chose an unusual way to go about this suit. Without getting into the nitty-gritty of anti-trust laws, the FTC has multiple sections of the FTC act to charge violators under. Normally when they engage in a lawsuit, they charge them under Section 2, which allows for harmed consumers to sue violators in private for triple damages. The FTC has decided that it’s in the best interest of everyone to not open Intel to that kind of liability or to take the risk that they’ll lose the suit based on that kind of liability, and instead charge them under Section 5. The big difference between the sections is that a Section 5 violation only leaves Intel open to the damages caused by their actions, and not to triple that price tag. Overall the use of Section 5 is very rare compared to Section 2, but the use of it is growing according to the FTC.

At this point we do not have any idea what the price tag would be on damages for Intel if they were to lose this suit, but it’s a reasonable expectation that it won’t be cheap, going into the billions of dollars. Triple damages would make that even higher. As triple damages were established as a punitive solution, this is consistent with the FTC’s position that they are not trying to enact a punitive remedy upon Intel.

Conclusion

So when does this battle royale kick-off? Not for a while, it seems. The case is currently scheduled to go before a judge on Wednesday, September 15th of 2010, which is 9 months from now. Even if it were to start on time (it likely won’t), a ruling would take an equally long time. It may be 2012 before the case is ruled on, later if the case starts late.

In the meantime, there are the positions of NVIDIA, Intel, and AMD to consider. Despite the FTC’s immediate concerns, with the recent cancelation of Larrabee Prime, Intel probably isn’t the risk to the GPU market that the FTC believes they are. The question will be what Intel will be announcing in 2010 as the successor to Larrabee Prime, and what actions they may be taking. It’s not in their best interests with this case to engage in anything that might be seen as disparaging of AMD or NVIDIA GPUs, which in turn may influence Intel’s actions here.

As for AMD, for them this entire matter is largely settled when it comes to CPUs. Their exposure on the GPU side is a bit more nebulous – they aren’t going to make integrated GPUs for Intel processors, so their exposure is in the smaller discrete GPU market. Without a better idea of what the FTC is accusing Intel of when it comes to discrete GPUs, it’s hard to say what the impact of this is. If this stops Intel’s anti-GPGPU efforts however, then it’s going to be good news for AMD’s efforts in that field.


Fermi: Intel's greatest fear?

And finally there’s NVIDIA. NVIDIA has been on a crash-course with Intel for some time now, and they would have it no other way. For NVIDIA this has been a very good month: first Larrabee Prime gets canceled, and now the FTC is going to fight Intel in court over several issues that effectively has the FTC fighting Intel on NVIDIA’s behalf. This could go a very long way in boosting NVIDIA’s GPGPU efforts with Fermi, not to mention the fact that the IGP chipset business has been quite good to NVIDIA lately and is something they would like to continue. This suit could come quite close to defanging Intel from NVIDIA’s perspective.

On a long-term perspective, we’re left wondering where this is going to leave the entire market when it comes to GPU/CPU integration. Both AMD and Intel have been pushing it, with Intel preparing CPUs with both on-chip and on-die GPUs. Could a successful FTC suit put a stop to this Fusion for Intel? Will this slow down or stop GPU/CPU integration for the entire market, and greatly benefit CPU-less NVIDIA in the process? The outcome of this case could very well have an impact greater than just stopping any anti-competitive actions Intel is engaging in, so it’s going to be something we’ll be keeping a very close eye on.

Index
POST A COMMENT

114 Comments

View All Comments

  • Alouette Radeon - Wednesday, March 10, 2010 - link

    How could anyone still support Intel? You realize that their anti-competitive practices haven't just hurt AMD and nVidia, they've hurt US, the consumers! Intel has shown that they don't give a damn about the industry, they just want dominance. They don't care about the technology, they just want money. nVidia is dishonest, sure, that's why I'll only be buying ATi for a good long while. However, Intel is so corrupt that I'd choose a VIA nano before I'd take an Intel CPU. Does it hurt me to do so? I don't think so. I have a brilliant gaming rig based on the Phenom II X4 940, the AMD 790FX northbridge and the ATi Radeon HD 4870! Considering the savings I realized over purchasing an Intel/nVidia combo I'd say that instead of hindering me, my choice of platform actually was to my benefit! Intel can go pound salt. Reply
  • chizow - Monday, December 21, 2009 - link

    Great write-up Ryan, very thorough yet easy to digest and well worth the read, however, you missed two extremely important points from the FTC's complaint, discussed in this NY Times article:

    http://bits.blogs.nytimes.com/2009/12/17/has-the-f...">http://bits.blogs.nytimes.com/2009/12/1...for-the-...

    quote:

    No. 17 - Requiring Intel to make available technology (including whatever is necessary to interoperate with Intel’s CPUs or chipsets) to others, via licensing or other means, upon such terms and conditions as the Commission may order, including but not limited to extensions of terms of current licenses.


    and

    quote:

    No. 18 - Prohibiting Intel from including or enforcing terms in its x86 licensing agreements that restrict the ability of licensees to change ownership, to obtain investments or financing, to outsource production of x86 microprocessors, or to otherwise partner with third parties to expand output.


    While these are certainly long-shots that may extend beyond the scope of realistically enforceable actions, they do address some of the more popular "what-ifs" regarding Intel's stranglehold on x86 and their ability to stifle competition by voiding existing x86 licenses if their licensees are acquired by another company.

    Reply
  • Aim64C - Monday, December 21, 2009 - link

    Well, this certainly has some implications for the integrated graphics. I know many gamer-types scoff at the integrated graphics solutions, but when you go to schools, libraries, many corporate workstations, and military computers (all of which are ordered by the hundreds, thousands, and tens of thousands) - you see integrated graphics solutions. The overwhelming majority are Dell computers running an Intel processor with integrated graphics. Can't tell you how many Dells there are with Top-Secret classification stickers on them (don't need anything too heavy duty to handle message traffic) - but there are quite a few.

    Of course, what I'm far more concerned about is the implications this will have for the whole market. The computer industry has enjoyed a rather free and unregulated environment. Because of that, we have seen unprecedented growth and continual price-drops relative to GDP that have not been seen in any other industry since the industrial revolution.

    The rulings made in this case can end up shaping into computer market regulations for the whole of the computer industry. This would mean that certain practices that have given us low-cost computer-electronics will go by the wayside.

    Take, for instance, volume-discounts. If I am only going to build OEM PCs with Intel CPUs (or AMD CPUs, whichever), I can anticipate the relative demand along one dimension - cost. Higher-cost components are going to be in lower demand than the middle-road and cheaper components aimed at the average internet browsing consumer who might get a wild hair up their anus and start playing WoW. Thus, I can anticipate demand for the whole season and order in huge quantity with bulk savings (which is a common industry practice - I could get into why this is done from the manufacturer's perspective, but you can google that if you really don't know and care to know).

    Now, if I am forced to vary my market and cannot choose to support only a single CPU by market restrictions - I now have two dimensions to the demands I will experience. Not only will I be seeing changes in the relative spending trends (high dollar components being less/more popular with consumers) but also changes between brands. I could still purchase from both companies for the whole season, but I run the risk of misinterpreting the market, and having to order more AMD or Intel while having surplus of the other brand. This means I'm going to go from seasonal purchases to quarterly or even monthly purchases from the manufacturer. This will drive costs up at least 10-20% for the OEM builder, while the suicide rate of upper-managers at Intel and AMD would go up exponentially due to the logistical nightmare all of this would create.

    While Intel has been behaving in a manner not becoming of a respectable business as of late - I have even less respect for government-run agencies/committees that tend to be used to bring businesses under state ownership. Their suit against Intel can be used to a much broader effect later on if they win, and will use it to bring over-regulation into the computer industry, which will have the same effect it's had on every other industry that has become so tied up in government regulations that it has more bureaucrats than actual floor workers.
    Reply
  • Donkey2008 - Saturday, December 19, 2009 - link

    Concerning Intel IGP, I disagree with all of the overly opinionated tech users on this board. Claiming Intel graphics are "abysimal" is a ridiculous comment and made by someone who apparantly has no experience rolling out hundreds of desktops in a corporate setting. They are perfectly stable (let me correct that - entirely MORE stable than ANY aftermarket card). If you need better 3D performance, buy an after market card. If you need multi-monitor support, buy an aftermarket card. It's pretty simply math.

    "OMGZ!! I can't play Fallout 3 with my G31 graphics!"

    No shit. Get a clue or possibly a new job, because you obviously don't have the common sense to work in IT.
    Reply
  • Aries1470 - Saturday, December 19, 2009 - link

    Wow, at last. Someone with some sense. IGP are PERFECT for WORK COMPUTERS. Examples are: Call centres, Banks & Financial instutions and other areas. Excluding some small pockets in those industries that need stronger graphics. People should NOT be playing games on their work computers when they need to be productive. That is why at some companies there are special areas to play during their breaks/ smoko's (people might know them as tea or coffee breaks).

    IGP are Great, for industry computers, not CONSUMERS, unless they are used mostly for web browsing etc or (HD)DVD / BD playback.

    And I would like to correct some people. IT IS NOT A DUOPOLY, even if it seems like it is. There is VIA for CPU & Chipsets with S3 for Graphics & SiS for Chipsets & Graphics. Granted they are not that great, except for very low power consumption or great image quality, with low power and not really for Gaming, SiS are still on DX9, but S3 are with DX10.1 and with BD playback and some other things...
    Reply
  • MengNa - Sunday, December 20, 2009 - link

    A duopoly doesn't mean there are no other competitors on the market, it mean that the competitors market share is relatively insignificant.
    Intel vs AMD and Nvidia vs ATI are textbook duopolies.
    Reply
  • Wirmish - Thursday, December 17, 2009 - link

    "For Intel to do a few different things about the versions of their compiler that put AMD at a disadvantage (which the FTC is calling the Defective Compiler): offer a substitute compiler to customers for free that is not a Defective Compiler, or to compensate customers in switching to another compiler, to provide notice to software buyers of products compiled using the Defective Compiler that they may need to replace their software."

    Like this ? -> http://arstechnica.com/hardware/reviews/2008/07/at...">http://arstechnica.com/hardware/reviews/2008/07/at...
    Reply
  • Scali - Friday, December 18, 2009 - link

    Sadly it's not always that simple.
    I've written optimized MMX routines for Pentium MMX that turned out to run like a dog on Pentium II or Athlon (which I couldn't have known at the time I wrote them, because those CPUs weren't on the market yet).
    When CPUs are significantly different in architecture, then just checking for a certain featureset isn't going to guarantee the best performance. There could be severe performance penalties for certain code constructs. I think people just don't really understand that. They think x86 is x86, SSE is SSE, and all that. It doesn't always work that way (even with different CPUs from the same vendor, like Pentium vs PII, or Pentium 4 vs Core2).
    You just can't win em all.

    However, using multiple code paths in a benchmark... that's a bit dubious imho. That is, selecting one of various code paths. I think the proper way would be to run ALL codepaths on ALL CPUs. That way you avoid the problem that not all CPUs run the most optimal codepath for them.
    Reply
  • mountain2k - Friday, December 18, 2009 - link

    Although I agree with hanging intel out to dry for anti-competitive behaviour, I don't agree with the way they try to do it. When it comes to the rebates, prioritising clients, ok. It might be a thin line, but Intel is the big dog, so they need to be more careful. There weren't though luck for them, make them pay.
    When it comes down to their compilers, I was not aware that intel had any significant market-share that would allow it to therewith stifle competition.
    When it comes to licensing of patents... that's a whole other ballgame. You can't set the rules for intel to be any different just because they are top dog. To give make it bluntly obvious, why not force NV to free their patents so that intel could include a proper GPU? It is just as crazy as the other way around! What would be wiser, is to re-evaluate the patent-laws altogether. Patents that haven't been used for more than 5 years after applying... patent becomes open source. Patent older then 10 years... open source. That would drive competition, knowing that they couldn't hide behind patents for years. Imagine of all patents regarding CPU and GPU would be open source that were 10 years or older...

    Yes, intel needs to get punished, but don't throw out the baby with the bathwater.
    Reply
  • Scali - Friday, December 18, 2009 - link

    We must not forget why the patent system was invented in the first place. It is to protect the inventor so that he can exploit his invention.
    In that sense it's good. Without patents, I think the industry would become self-destructive... One company invests millions into a new invention, another company just clones it and runs away with the profit, leaving the first company to go bankrupt.
    At some point, nobody will invent anything anymore, because they cannot protect their investment. In software, open source is mainly doing the same... They provide clones for existing applications, but you rarely see something new or groundbreaking, it's just 'commoditizing'. Companies who invest in new developments (eg Apple's UI or Microsoft's Surface), will do that in a closed way, to protect their investment.

    I think they now run into the problem that patents can make a company huge and dominate the entire market. I think it's about 20 years too late now. Intel won the war back when AMD wanted to build 386 clones, and Intel could delay them for years, until they were finally forced to open up x86 and the related patents for licensing.
    During that time, Intel had already cornered the market, and gotten such a headstart on AMD that it's virtually impossible for AMD to ever get back in the race.

    So now they go after Intel and try to use the anti-trust laws to throw the book at them. Thing is that those anti-trust laws are pretty arbitrary.
    Steve Ballmer said the same thing... They battled it out in court for years because they wanted to have clear rules of what they can and cannot do. So now they made their own 'case law'.
    I think Intel should do the same thing. Just battle it out in court for years, and in the process, you basically paint the FTC into a corner.
    Let this anti-trust madness end. Define some proper rules. Sure, Microsoft and Intel may have broken the rules... but even if they don't, it won't change the situation. They're too big to compete with.
    Reply

Log in

Don't have an account? Sign up now