Mar 9, 2005 3 min read

By Natalie Obiko Pearson Associated Press Writer

TOKYO (AP) – Japan’s anti-monopoly agency demanded Tuesday that Intel Corp. halt business practices it said were giving the world’s dominant chipmaker an unfair advantage in the personal computer market.

The Fair Trade Commission threatened to put in motion a process that could lead to enforcement action, and gave Intel 10 days to respond

The FTC said Intel broke antitrust laws as early as 2002, trying to elbow out microprocessor-making through discounts and marketing payments given to personal computer makers in exchange for exclusivity or near exclusivity.

“Intel is engaging in actions to keep CPUs (central processing units) made by competing companies from being used,” the FTC said in a statement. “These actions … are substantially limiting the CPU sales sector for domestic personal computer makers.”

It ordered the company to put an end to the practice.

The move follows an April 2004 raid by the FTC on Intel’s three Japanese offices on suspicions the company was improperly leveraging its market dominance to urge PC makers not to use microprocessors made by rivals including Advanced Micro Devices Inc. and Transmeta Corp.

The FTC said Intel had offered lower prices and marketing money to Hitachi Ltd., Sony Corp., Fujitsu Ltd., Toshiba Corp. and NEC Corp., which use Intel chips and brand their products with “Intel Inside” and “Centrino” labels. Centrino is Intel’s wireless networking chipset.

Intel made the deals on condition that the PC makers either exclusively use Intel chips or limit the use of rivals’ chips to 10 percent, the FTC said.

Intel’s share of the CPU market in Japan rose to 90 percent in 2004, from 78 percent in 2002, according to estimates by market research firm IDC. Advanced Micro Devices’ share fell to 8 percent, from 18 percent, over the same period.

Intel defended its business practices in Japan as “both fair and lawful.”

Company spokesman Chuck Mulloy in California said no evidence exists that Intel’s discounts led to higher prices or lower output that can lead to higher prices.

In other countries, antitrust regulators typically look beyond competitors, he said.

“The Japanese FTC appears to be focusing only on harm to competitors as opposed the consensus view in the antitrust community that you should look at what happened to the market or, more importantly, to consumers,” said Mulloy. “That analysis and that consideration are absent from this recommendation.”

He said the company was reviewing the case.

If Intel rejects the FTC’s recommendations to drop its practices, the agency could launch legal proceedings against it. It was not immediately clear what potential consequences the company could face if the matter goes to court.

If Intel decides to appeal the FTC’s ruling, it could be months or years before any action is taken.

An FTC case against Microsoft Corp., which the commission accused of unfair licensing arrangements with Japanese manufacturers, has been held up in government hearings.

Santa Clara, California-based Intel also has faced similar probes by antitrust regulators into its business practices in other parts of the world, including in the United States and Europe.

On Tuesday, a European Union spokesman said regulators in Brussels were continuing their own investigation into Intel.

AP-ES-03-08-05 1523EST