Why the FTC Avoided an Antitrust Claim in its Suit Against Intel
Intel’s new general counsel Douglas Melamed may be able to find a silver lining in a lawsuit filed against the chip maker today by the Federal Trade Commission.
The FTC alleges anti-competitive practices by Intel but avoids antitrust allegations that could prove more costly for the company.
The FTC suit claims Intel used its size to stifle competition in the microchip market, according to stories in the Wall Street Journal (sub. req.) and the New York Times. The administrative complaint claims Intel discouraged use of rival computer chips through threats and rewards aimed at the world’s largest computer manufacturers, including Dell, Hewlett-Packard, and IBM, according to a press release.
The FTC accuses Intel of violating Section 5 of the FTC Act, which is broader than the antitrust laws and prohibits unfair methods of competition. “Critically, unlike an antitrust violation, a violation of Section 5 cannot be used to establish liability for plaintiffs to seek triple damages in private litigation against the same defendant,” the press release says.
A statement (PDF) by FTC Chairman Jon Leibowitz and commissioner J. Thomas Rosch elaborates, saying Section 5 was used because courts are becoming increasingly reluctant to enforce antitrust laws because of fears about private litigation that will result in huge damage awards.
Until recently, the commission has not pursued free-standing unfair competition claims outside of the most well-accepted areas, partly because antitrust laws were used to police the anticompetitive conduct, the statement says.
“However, concern over class actions, treble damages awards, and costly jury trials have caused many courts in recent decades to limit the reach of antitrust,” the statement says. “The result has been that some conduct harmful to consumers may be given a ‘free pass’ under antitrust jurisprudence, not because the conduct is benign but out of a fear that the harm might be outweighed by the collateral consequences created by private enforcement.”
The costs for Intel are already adding up. The company recently agreed to pay $1.25 billion to resolve antitrust and patent litigation with Advanced Micro Devices. The settlement followed a record $1.45 billion fine imposed by the European Union against Intel in May for anti-competitive practices used to keep AMD out of the market for computer chips.
New York Attorney General Andrew Cuomo sued Intel last month, alleging the company paid kickbacks disguised as rebates to keep computer companies from using rivals’ microchips.
