[Federal Register Volume 75, Number 153 (Tuesday, August 10, 2010)]
[Notices]
[Pages 48338-48346]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-19694]
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FEDERAL TRADE COMMISSION
[Docket No. 9341]
Intel Corporation; Analysis of Proposed Consent Order to Aid
Public Comment
AGENCY: Federal Trade Commission.
ACTION: Proposed Consent Agreement.
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SUMMARY: The consent agreement in this matter settles alleged
violations of federal law prohibiting unfair or deceptive acts or
practices or unfair methods of competition. The attached Analysis to
Aid Public Comment describes both the allegations in the complaint and
the terms of the consent order -- embodied in the consent agreement --
that would settle these allegations.
DATES: Comments must be received on or before September 7, 2010.
ADDRESSES: Interested parties are invited to submit written comments
electronically or in paper form. Comments should refer to ``Intel,
Docket No. 9341'' to facilitate the organization of comments. Please
note that your comment -- including your name and your state -- will be
placed on the public record of this proceeding, including on the
publicly accessible FTC website, at (http://www.ftc.gov/os/publiccomments.shtm).
Because comments will be made public, they should not include any
sensitive personal information, such as an individual's Social Security
Number; date of birth; driver's license number or other state
identification number, or foreign country equivalent; passport number;
financial account number; or credit or debit card number. Comments also
should not include any sensitive health information, such as medical
records or other individually identifiable health information. In
addition, comments should not include any ``[t]rade secret or any
commercial or financial information which is obtained from any person
and which is privileged or confidential. . . .,'' as provided in
Section 6(f) of the FTC Act, 15 U.S.C. 46(f), and Commission Rule
4.10(a)(2), 16 CFR 4.10(a)(2). Comments containing material for which
confidential treatment is requested must be filed in paper form, must
be clearly labeled ``Confidential,'' and must comply with FTC Rule
4.9(c), 16 CFR 4.9(c).\1\
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\1\ The comment must be accompanied by an explicit request for
confidential treatment, including the factual and legal basis for
the request, and must identify the specific portions of the comment
to be withheld from the public record. The request will be granted
or denied by the Commission's General Counsel, consistent with
applicable law and the public interest. See FTC Rule 4.9(c), 16 CFR
4.9(c).
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Because paper mail addressed to the FTC is subject to delay due to
heightened security screening, please consider submitting your comments
in electronic form. Comments filed in electronic form should be
submitted by using the following weblink: (https://ftcpublic.commentworks.com/ftc/intel/) and following the instructions
on the web-based form. To ensure that the Commission considers an
electronic comment, you must file it on the web-
[[Page 48339]]
based form at the weblink: (https://ftcpublic.commentworks.com/ftc/intel/). If this Notice appears at (http://www.regulations.gov/search/index.jsp), you may also file an electronic comment through that
website. The Commission will consider all comments that regulations.gov
forwards to it. You may also visit the FTC website at (http://www.ftc.gov/) to read the Notice and the news release describing it.
A comment filed in paper form should include the ``Intel, Docket
No. 9341'' reference both in the text and on the envelope, and should
be mailed or delivered to the following address: Federal Trade
Commission, Office of the Secretary, Room H-135 (Annex D), 600
Pennsylvania Avenue, NW, Washington, DC 20580. The FTC is requesting
that any comment filed in paper form be sent by courier or overnight
service, if possible, because U.S. postal mail in the Washington area
and at the Commission is subject to delay due to heightened security
precautions.
The Federal Trade Commission Act (``FTC Act'') and other laws the
Commission administers permit the collection of public comments to
consider and use in this proceeding as appropriate. The Commission will
consider all timely and responsive public comments that it receives,
whether filed in paper or electronic form. Comments received will be
available to the public on the FTC website, to the extent practicable,
at (http://www.ftc.gov/os/publiccomments.shtm). As a matter of
discretion, the Commission makes every effort to remove home contact
information for individuals from the public comments it receives before
placing those comments on the FTC website. More information, including
routine uses permitted by the Privacy Act, may be found in the FTC's
privacy policy, at (http://www.ftc.gov/ftc/privacy.shtm).
FOR FURTHER INFORMATION CONTACT: Richard Feinstein (202-326-3658),
Bureau of Competition, 600 Pennsylvania Avenue, NW, Washington, D.C.
20580.
SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), and Sec. 3.25(f)
the Commission Rules of Practice, 16 CFR 3.25(f), notice is hereby
given that the above-captioned consent agreement containing a consent
order to cease and desist, having been filed with and accepted, subject
to final approval, by the Commission, has been placed on the public
record for a period of thirty (30) days. The following Analysis to Aid
Public Comment describes the terms of the consent agreement, and the
allegations in the complaint. An electronic copy of the full text of
the consent agreement package can be obtained from the FTC Home Page
(for August 4, 2010), on the World Wide Web, at (http://www.ftc.gov/os/actions.shtm). A paper copy can be obtained from the FTC Public
Reference Room, Room 130-H, 600 Pennsylvania Avenue, NW, Washington,
D.C. 20580, either in person or by calling (202) 326-2222.
Public comments are invited, and may be filed with the Commission
in either paper or electronic form. All comments should be filed as
prescribed in the ADDRESSES section above, and must be received on or
before the date specified in the DATES section.
Analysis of Agreement Containing Consent Order to Aid Public Comment
The Federal Trade Commission (``Commission'' or ``FTC'') accepted
for public comment an Agreement Containing Consent Order (``Proposed
Consent Order'') with Intel Corporation (``Intel'') to resolve an
Administrative Complaint issued by the Commission on December 16,
2009.\2\ The Complaint alleged that Intel unlawfully maintained its
monopoly in the relevant CPU markets, and sought to acquire a second
monopoly in the relevant graphics markets, using a variety of unfair
methods of competition. Consumers were harmed by Intel's conduct, which
resulted in higher prices, less innovation, and less consumer choice in
the relevant markets. Consumers were also harmed by Intel's deceptive
disclosures related to its compilers, which violated both competition
and consumer protection principles. The Proposed Consent Order will
bring immediate relief in the relevant markets and puts Intel under
Commission Order.
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\2\ The Complaint was brought under Section 5 of the Federal
Trade Commission Act, which ``was designed to supplement and bolster
the Sherman Act and the Clayton Act [hellip] to stop in their
incipiency acts and practices which, when full blown, would violate
those Acts [hellip] as well as to condemn as `unfair methods of
competition' existing violations'' of those acts and practices.
F.T.C. v. Brown Shoe Co., 384 U.S. 316, 322 (1966) (quoting F.T.C.
v. Motion Picture Adv. Serv. Co., 344 U.S. 392, 394-95 (1953)); see
also F.T.C. v. Indiana Fed'n of Dentists, 476 U.S. 447, 454 (1986).
In addition, the Commission has the jurisdiction under Section 5 to
challenge ``unfair or deceptive acts or practices in or affecting
commerce . . .''
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As described in detail below, the Proposed Consent Order has two
fundamental goals. First, it seeks to undo the effects of Intel's past
restraints on competition by enhancing the ability of AMD, NVIDIA, Via,
and others to compete effectively with Intel. To that end, the Proposed
Consent Order seeks: 1) to make it easier for AMD, NVIDIA, and Via to
use third-party foundries to manufacture products (to enable them to
better match Intel's manufacturing advantages) (Section III.A.); 2) to
give AMD, NVIDIA, and Via flexibility to secure modifications of change
of control provisions in their Licensing Agreements with Intel (Section
III.B); 3) to extend Via's intellectual property license (Section
III.C); and 4) to provide assurances to manufacturers of complementary
and peripheral products that they will be able to connect their devices
to Intel's CPUs (Section II). These provisions compel Intel to make
certain offers; they do not compel a third party to accept them. The
goal is to require Intel to open the door to renewed competition, not
to force a third party to take any particular action.
Second, the Proposed Consent Order is designed to protect the
ability of customers and existing and future Intel competitors to
engage in mutually beneficial trade, while prohibiting Intel from using
certain practices to deter or thwart such trade. The Proposed Consent
Order therefore prohibits Intel from engaging in: 1) certain pricing
practices that could allow Intel to exclude competitors while
maintaining high prices to consumers (Section IV.A.); 2) predatory
design that disadvantages competing products without providing a
performance benefit to the Intel product (Section V); and 3) deception
related to its product road maps, its compilers, and product
benchmarking (Sections VI, VII, and VIII).
The Proposed Consent Order is for settlement purposes only and is
tailored to remedy the effects of Intel's specific conduct in the
market context in which that conduct took place. The purpose of the
Commission's Order is not punitive but rather remedial.\3\ Intel's
adherence to the specific provisions will not insulate it from future
Commission scrutiny or enforcement action if its conduct otherwise
violates the antitrust laws. That is, the Proposed Consent Order does
not operate as a safe harbor for Intel. The Commission can not only
challenge (and seek civil fines for) Order violations, but also has
authority to challenge any practice not prohibited by the Proposed
Consent Order (including, but not limited to, any pricing practice or
design change that harms competition) in a potential future legal
challenge. The prohibitions and standards utilized in the Proposed
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Consent Order do not necessarily reflect the applicable legal standards
under the Sherman Act, Clayton Act, or the FTC Act; indeed, the legal
standards applicable to some of these practices remain unsettled by the
Supreme Court and the federal courts of appeal. The Commission
expressly reserves the right to challenge Intel's future
anticompetitive conduct if it has reason to believe that, considered in
context, the effect of Intel's conduct is to enable it to increase or
maintain power over price, output, or non-price competition in any
market in which it is a participant. Furthermore, the Commission has
the authority to monitor and determine whether the Commission has
reason to believe that Intel has not strictly complied with all of the
provisions of this Proposed Consent Order (including, but not limited
to, the obligation to negotiate a license in good faith after a change
of control of AMD, NVIDIA, or Via). The Commission expressly reserves
its right to exercise this authority as well.
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\3\ As a general rule, the Commission's statutory authority is
designed to remedy conduct going forward as opposed to punishing
past conduct. For example, the Commission does not have the
authority to levy fines for antitrust violations.
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The Proposed Consent Order has been placed on the public record for
30 days for comments. Comments received during this period will become
part of the public record. After 30 days, the Commission will review
the Proposed Consent Order and comments received and will decide
whether it should withdraw from the Proposed Consent Order or make
final the Order contained in the Agreement. The purpose of this
analysis is to invite and facilitate public comment concerning the
Proposed Consent Order.
1. The Commission's Complaint
The Federal Trade Commission voted 3-0 to issue an Administrative
Complaint against Intel on December 16, 2009. Intel is a Delaware
corporation with its principal place of business in Santa Clara,
California. Intel develops, manufactures, markets, and sells computer
hardware and software products, including x86 CPUs and graphics
processors. The Complaint alleged that Intel engaged in a course of
conduct over a ten-year period that was designed to, and did, stall the
widespread adoption of non-Intel products. That course of conduct
allowed Intel to unlawfully maintain its monopoly in the relevant CPU
markets through means other than competition on the merits and created
a dangerous probability that Intel would acquire a monopoly in the
relevant GPU markets.
First, the Complaint alleges that Intel maintained its monopoly in
the markets for x86 CPUs for desktops, notebooks, and servers, as well
as smaller relevant markets, by engaging in a course of conduct that
foreclosed or limited the adoption of non-Intel x86 CPUs. The CPU of a
computer system processes data and controls other devices in the
system, acting as the computer's ``brains.'' The x86 CPU architecture
and instruction set is the industry standard for CPUs used in
notebooks, desktops, workstations, and volume servers.\4\ The Complaint
alleges a variety of relevant markets tied to the x86 CPU architecture
including an overall x86 market. The non-x86 CPU alternatives did not
constrain Intel's monopoly during the relevant time period.
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\4\ There are a handful of alternative CPU architectures that
are used in very high-end servers or handheld devices. However,
these alternatives did not compete in the notebook, desktop,
workstation, or volume server x86 CPU markets during the relevant
time period.
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Intel's only significant competitor in the relevant x86 CPU markets
is AMD, based in Sunnyvale, California. AMD mounted serious challenges
to Intel's position in 1999 when it released its Athlon x86 CPU and
again in 2003 when it released its Opteron x86 CPU. The only other firm
that sells x86 CPUs is a small Taiwanese firm, Via Technologies. A
fourth firm, Transmeta, sold a small number of x86 CPUs in the notebook
market but exited the market in 2006.
Over the last decade, Intel's share of the overall x86 CPU market
(desktop, notebook, and server) has consistently exceeded 65 percent;
its share of the x86 CPU desktop market has consistently exceeded 70
percent; and its share of the x86 CPU notebook market has consistently
exceeded 80 percent. Intel's monopoly position in these markets is
partially protected by significant barriers to entry, including
reputation, scale economies, intellectual property rights, costs
associated with building and operating large manufacturing facilities,
and research and development costs. These legitimate barriers to entry
make vigorous enforcement of the competition laws all the more
important. The Proposed Order is designed to ensure that Intel cannot
blunt entry and expansion by raising barriers in the relevant markets
using means other than competition on the merits.
Second, the Complaint also challenges Intel's unfair methods of
competition in the Graphics Processing Unit (``GPU'', also referred to
as ``graphics'') markets. GPUs originated as specialized processors for
generating computer graphics. In recent years, GPUs have become
increasingly sophisticated as computing graphics have grown in
importance. GPUs have also evolved to take on more functionality. GPUs
are increasingly performing computations traditionally performed by the
CPU, allowing OEMs to use lower-end CPUs or fewer microprocessors for a
given level of performance. As a result, GPUs are creating better
products at lower prices for consumers.
The graphics market is highly concentrated with high barriers to
entry. Intel competes in the graphics market with NVIDIA and AMD/ATI.
Intel makes and sells graphics processors that are either integrated
into chipsets or directly onto the CPU. NVIDIA and AMD/ATI sell both
graphics processors integrated into chipsets as well as discrete
graphics cards. NVIDIA has been at the forefront of developing GPU
functionality beyond merely graphics applications. The growth of
NVIDIA's General Purpose GPU (``GP-GPU'') computing allegedly
threatened to undermine Intel's x86 CPU monopoly. The Complaint alleges
that Intel engaged in behavior, other than competition on the merits,
to marginalize NVIDIA and slow the adoption of GP-GPU computing.
A. Unfair and Exclusionary Commercial Practices in the Relevant CPU
Markets
The Complaint alleges that Intel engaged in a variety of unfair
methods of competition to foreclose or limit the adoption of non-Intel
x86 CPUs by the world's largest original equipment manufacturers
(``OEMs''). The largest original equipment manufacturers (``Tier One
OEMs'') include Hewlett-Packard/Compaq, Dell, IBM, Lenovo, Toshiba,
Acer/Gateway, Sun, Sony, NEC, Apple, and Fujitsu, which combined
account for more than 60 percent of all personal computer sales and are
the only suppliers qualified to fulfill certain needs of large business
buyers. Tier One OEMs provide a crucial distribution channel for any
manufacturer of CPUs, chipsets or GPUs. Tier One OEMs supply high
volume sales with the concomitant substantially reduced distribution
cost. In three respects, Intel's conduct foreclosed significantly non-
Intel x86 CPU suppliers from selling product to Tier One OEMs.
First, Intel induced certain Tier One OEMs to forgo adoption or
purchases of non-Intel CPUs. When Intel failed to prevent an OEM from
adopting non-Intel CPUs, it sought to limit such purchases to a small
percentage of the sales of certain computer products. The Complaint
alleges, for example, that Intel entered into de facto exclusive
dealing arrangements and market-share deals with those Tier One OEMs
that agreed to limit their purchases of AMD or Via products. Tier One
OEMs that
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purchased all or nearly all of their CPU requirements from Intel
received large rebates and lump-sum payments from Intel, as well as
guarantees of supply during supply shortages. In other cases, Intel
paid Tier One OEMs not to sell computers with non-Intel CPUs, such as
AMD's, Transmeta's or Via's CPUs. The Complaint alleges that these
arrangements did not represent competition on the merits, were designed
to minimize pass-through of rebates to consumers, and that Intel
entered into these arrangements to block or slow the adoption of
competitive products by the Tier One OEMs and thereby maintain its
monopoly.
Second, Intel threatened OEMs that considered purchasing non-Intel
CPUs with, among other things, increased prices on other Intel
purchases, the loss of Intel's technical support, and/or the
termination of joint development projects.
Third, Intel sought to induce OEMs to limit advertising and
branding, and to forgo advantageous channels of distribution for
computers that contained non-Intel CPUs. For example, Intel induced
OEMs to forgo advertising, branding, certain distribution channels,
and/or promotion of computers containing non-Intel CPUs. To secure
these restrictive dealing arrangements with OEMs, Intel threatened to
withhold rebates, technical support, supply, and/or to terminate joint
development projects, among other things.
These practices severely limited the number of instances in which
OEMs selling non-Intel-based PCs competed directly against OEMs selling
Intel-based PCs, especially in servers and in commercial desktops and
notebooks. When an OEM selling Intel-based PCs competed against OEMs
selling AMD-based PCs, Intel often had to sell CPUs at competitive
prices. When such competition was eliminated, Intel could sell CPUs at
supra-competitive prices. Consequently, it was able simultaneously to
charge above-competitive prices and at the same time to exclude its
rivals, resulting in both higher prices and fewer choices for
consumers. In addition, Intel's retroactive quantity discounts were of
a type that could readily disguise effective below-cost pricing, which
would, under the circumstances, present a strong risk of predatory
effects.
This effectively allowed Intel to compete by raising the effective
prices of AMD's and Via's products rather than lowering the effective
prices of its own. It did this by effectively imposing a penalty on any
customers who purchased from Intel's rivals. Intel's market share
discounts and retaliatory practices described above all had this
effect, constituting an effective increase to the rival's price. The
end result was that Intel could make a rival's actual low prices look
very costly to customers without Intel's needing to reduce its own
prices or expand its own output.
B. Compiler and Benchmark Deception
The Complaint alleges that Intel's failure to fully disclose the
changes it made to its compilers and libraries beginning in 2003
violated both competition and consumer protection provisions of Section
5 of the FTC Act.
A compiler is a tool used by software developers to write software.
The compiler translates the ``source code'' written in high-level
computer languages into 0's and 1's that can be run as software on
consumers' computers. Intel's compilers compete with Microsoft's
compilers, open-source compilers, and others. Intel's compiler is used
by developers of high-performance applications.
The Complaint alleges that AMD's Athlon CPU, released in 1999, and
its Opteron CPU, released in 2003, equaled, and in some segments
surpassed, Intel's technology. Intel introduced a new version of its
compiler shortly before AMD released its Opteron CPU. The compiler
features introduced by Intel in 2003 effectively slowed the performance
of software written using Intel's compilers on non-Intel x86 CPUs such
as Opteron. To the unknowing public, OEMs, and software vendors, the
slower performance of non-Intel-based computers when running certain
software applications was mistakenly attributed to the performance of
non-Intel CPUs.
The Complaint also alleges that the direct impact of Intel's
deceptive disclosures was on independent software vendors and
developers that used Intel's compiler to write software. They were
unaware of the changes in the Intel compiler that would impact the
performance of their software when it ran on non-Intel-based computers.
The Complaint alleges Intel intentionally misrepresented the cause of
the performance differences and whether it could be solved.
Intel's deceptive disclosures related to its compiler redesign were
compounded by the adoption of industry standard benchmarks that
included software compiled using Intel's compiler. Benchmarks are
performance tests that compare attributes of competing CPUs. Industry
standard benchmarks are used by OEMs and consumers to judge performance
of competing CPUs. Intel failed to disclose to benchmarking
organizations the effects of its compiler redesign on non-Intel CPUs.
Several benchmarking organizations adopted benchmarks that measured
performance of CPUs by running software programs compiled using the
Intel compiler. The software compiled using Intel's compiler skewed the
performance results in Intel's favor. Intel promoted its systems'
performance under such benchmarks as realistic measures of typical or
``real world'' computer performance. The benchmarks were not accurate
or realistic measures of typical computer performance and they
overstated the performance of Intel's products as compared to non-Intel
products.
The Complaint alleges Intel's deceptive disclosures related to its
compiler contributed to Intel's maintenance of its monopoly power. For
example, AMD's CPU performance advantages were muted by Intel's
compiler. Intel's deception distorted the competitive dynamic and
harmed consumers. The Complaint also alleges that Intel's failure to
disclose was a deceptive act or practice.
Among the harms to consumers caused by Intel's deceptive conduct
was the harm to the credibility and reliability of industry benchmarks.
Industry benchmarks are important tools for consumers to make informed
purchasing choices. Informed consumer choice is a basic building block
of competition.
C. Unfair and Exclusionary Conduct to Suppress GPU Competition
Intel worked with NVIDIA for a number of years to ensure that
NVIDIA's GPUs could interoperate with Intel CPUs, and licensed NVIDIA
to allow it to manufacture Intel-compatible chipsets with integrated
graphics (also referred to as ``chipsets with integrated GPUs''). The
Complaint alleges that Intel began to perceive NVIDIA as a threat in
both the market for chipsets with integrated graphics and the market
for CPUs. The Complaint further alleges that Intel took a number of
actions to blunt the competitive threat posed by NVIDIA. For example,
Intel denied NVIDIA the ability to produce integrated chipsets that
would be compatible with Intel's next generation CPUs. In doing so, the
Complaint alleges that Intel misled NVIDIA on Intel's ``roadmaps'' or
product plans, causing NVIDIA to waste resources and crucial time
researching and designing integrated chipsets when, in fact, Intel
allegedly had no intention of permitting NVIDIA integrated chipsets to
interoperate with Intel's next generation of x86 microprocessors. This
increased NVIDIA's costs and delayed the
[[Page 48342]]
development of other products that would have increased competition in
both the market for chipsets and the market for CPUs. The Complaint
also alleges that Intel took steps to create technological barriers to
preclude non-Intel integrated chipsets from interconnecting with future
Intel CPUs. The Complaint further alleges that Intel bundled its CPUs
with its own integrated chipsets and then priced the bundle to punish
OEMs for buying non-Intel integrated chipsets.
II. Terms of the Proposed Consent Order
The touchstone of the Proposed Consent Order is the protection of
consumers and competition. Thus, the Proposed Consent Order provides
structural relief designed to restore the competition lost as a result
of Intel's past conduct, and injunctive relief that prevents Intel from
engaging in future unfair methods of competition. The injunctive relief
would prohibit Intel, when faced with new competitive threats, from
engaging in the exclusionary and unfair conduct alleged in the
Complaint. These provisions are designed to open the door to fair and
vigorous competition in the relevant markets, leading to lower prices,
more innovation, and more choice for consumers. The immediacy of this
relief is particularly important in these rapidly changing markets.
The Complaint did not seek to strip Intel of its x86 monopoly,
which was in large measure gained by innovation and associated
intellectual property rights. Rather, the Proposed Consent Order is
designed to undo the effects of Intel's anticompetitive conduct and
prevent its recurrence, by restoring as much as possible the
competitive conditions that would have prevailed absent the
anticompetitive behavior and by ensuring that the doors to competition
remain open. The Proposed Consent Order clarifies and extends AMD's and
Via's rights to the x86 technology. The injunctive relief in the
Proposed Consent Order is thus particularly important today to ensure
that AMD's new CPU products can have a fair test in the marketplace on
the merits and that Via more quickly has the clear path it needs to
design and produce its next generation of CPU products. The Complaint
did not seek to fine or penalize Intel for its conduct because the
Commission lacks that authority for violations of the antitrust laws.
A. Section II of the Proposed Consent Order
Section II of the Proposed Consent Order requires Intel to maintain
an open PCI Express (``PCIe'') Bus Interface on all of its CPU
platforms for six years. The PCIe bus is an industry standard bus used
to connect peripheral products such as discrete GPUs to the CPU. A bus
is a connection point between different components on a computer
motherboard. The PCIe bus serves a critical function on the Intel
platform. Intel's commitment to maintain an open PCIe bus will provide
discrete graphics manufacturers, such as NVIDIA and AMD/ATI, and
manufacturers of other peripheral products, assurances that their
products will remain viable and thus maintain their incentives to
innovate -- including the continued development of alternative
computing architectures such as General Purpose GPU computing. Intel's
commitment extends to high performance computing platforms that have
been at the forefront of General Purpose GPU computing. The Commission
recognizes the importance of the continued development of this
potential alternative computing architecture.
The Commission recognizes that it may be difficult to forecast the
future of innovation in these markets. The CPU and GPU markets are
dynamic, and technology may be very different in three or four years.
The Commission has the authority to reduce the number of years Intel
must maintain the PCIe bus on any of its CPU platforms. For example,
the Commission may reduce the commitment if the market has moved away
from PCIe and it no longer serves a gateway function to Intel's CPU.
Section II.C of the Proposed Consent Order prohibits Intel from
limiting the performance of the PCIe bus in a manner that would hamper
graphics performance or GP-GPU compute functionality of discrete GPUs.
The provision would assure NVIDIA, AMD/ATI, and other potential
manufacturers of products that would use the PCIe bus that they will be
able to connect to Intel CPUs in both mainstream and high-performance
computers in the future, and that the performance of their products
will not be degraded by Intel. These assurances will also allow NVIDIA
and others to continue developing GP-GPU computing as a complement to
the processing power of the CPU.
B. Intel Assurances on Third Party Foundry Rights
Section III.A of the Proposed Consent Order would require Intel to
allow AMD, NVIDIA, and Via to disclose relevant ``have made'' rights
under their respective licensing agreements with Intel to foundries and
customers. The Proposed Consent Order would further require Intel to
confirm to any foundry or customer that AMD, NVIDIA, and Via licenses
confer such ``have made'' rights. ``Have made'' rights allow AMD,
NVIDIA, and Via to contract out manufacturing to third parties. Absent
Intel's assurances and disclosures, customers and foundries might be
deterred from making or selling the products of these competitors when
they are, in fact, licensed, based upon unwarranted fear of being sued
by Intel for infringement. These disclosures will help eliminate any
uncertainty surrounding the rights of AMD, NVIDIA, and Via to use third
party foundries to manufacture x86 microprocessors or other products
under their respective cross licenses.
C. Change of Control Modifications to Current License Agreements with
AMD, NVIDIA, and Via
Section III.B of the Proposed Consent Order would require Intel to
offer to modify the change of control terms in Intel's intellectual
property licenses with AMD, NVIDIA, and Via. The Commission is
concerned that Intel's past conduct has weakened AMD and Via - Intel's
only x86 competitors. This provision seeks to ensure that these
existing competitors can partner with third parties to create a more
formidable competitor to Intel.
The existing change of control terms in licensing agreements
potentially limit the ability of AMD, NVIDIA, and Via to take part in a
merger or joint venture, or to raise capital. The provisions in the
Proposed Consent Order are designed to allow AMD, NVIDIA, and Via to
enter into a merger or joint venture with a third party, or to
otherwise raise capital, without exposing itself to an immediate patent
infringement suit by Intel. In the event that AMD, NVIDIA, or Via
undergo a change of control, these provisions prohibit Intel from suing
for patent infringement for 30 days. Furthermore, Intel must offer a
one-year standstill agreement during which the acquiring party and
Intel would not sue each other for patent infringement while both
parties enter into good faith negotiations over a new license
agreement.
The Commission takes seriously Intel's commitment under these
provisions in the Proposed Consent Order. The Commission has authority
under the Order to evaluate and determine whether Intel in fact engages
in good faith negotiations and the Commission will be able to enforce
the Proposed Consent Order if Intel does not negotiate in good faith.
In the event the change of control terms are invoked,
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the Commission will carefully scrutinize Intel's conduct and take
action, if appropriate.
D. Via x86 Licensing Agreement Extension and Assurances
Section III.C of the Proposed Consent Order requires Intel to offer
a five year extension to its cross-license with Via. The extension of
the cross license guarantees that Via has the opportunity to continue
competing in the x86 CPU market until at least 2018. Section III.C also
requires Intel to confirm that Via may lawfully make, sell, and import
x86 products without violating the Intel license. This disclosure is
designed to eliminate uncertainty surrounding Via's right to compete in
the relevant x86 CPU markets through 2018.
The extension of the Via license agreement, coupled with the
modifications to the change-of-control provisions in Section III.B,
open the door to a potential joint venture or acquisition of Via and
its x86 license by a strong and well financed entrant to the x86
markets.
E. Commercial Practices Provisions
The prohibitions in Section IV.A of the Proposed Consent Order
address Intel's commercial practices. These provisions are specifically
designed to protect competition, not any one competitor. The Proposed
Consent Order protects competition in the markets for CPUs (including
CPUs with integrated graphics), chipsets, and GPUs. In contrast,
Intel's settlement with AMD in November 2009 only protected AMD from
certain exclusionary practices and did not extend to GPUs or chipsets.
The rationale for extending the prohibitions to all chipsets is
two-fold. First, Intel's CPUs and chipsets are sold on a one-to-one
basis. That is, an Intel chipset will only work with an Intel CPU.
Thus, an agreement to purchase chipsets exclusively from Intel means
that an OEM must purchase CPUs exclusively from Intel. Likewise, an
OEM's agreement to purchase 95 percent of its chipsets from Intel means
that an OEM will purchase at least 95 percent of its CPUs from Intel.
Second, extending the Proposed Consent Order to chipsets also protects
competition in the market for chipsets. The Commission recognizes that
chipsets still play an important role in platform innovation. The
provisions are designed to protect the development of new competitive
options that may emerge from this market.
1. Prohibitions on Commercial Practices
The Proposed Consent Order prohibits Intel from engaging in seven
enumerated sales practices in the CPU, chipset, and GPU markets.
Section IV.A prohibits Intel from offering benefits to OEMs, original
design manufacturer (``ODMs''), or End Users in exchange for assurances
that the customers will refrain from dealing with Intel's competitors.
``Benefit'' is broadly defined and includes not only monetary
consideration but also encompasses access to technical information,
supply, and technical and engineering support. Section IV.A also
prohibits Intel from punishing its customers by withholding benefits
from those that purchase from non-Intel suppliers of CPUs, chipsets,
and GPUs.
Section IV.A.1 would prohibit Intel from conditioning a benefit on
an OEM's, ODM's, or End User's agreement to purchase a CPU, chipset,
and/or GPU exclusively from Intel in any geographic area (e.g., the
United States), market segment (e.g., servers, workstations, commercial
desktops, etc.), product segment (e.g., multi-processor servers, high-
end desktops, etc.), or distribution channel. For example, the Proposed
Consent Order would prohibit Intel from conditioning a benefit on an
OEM's agreement to purchase CPUs for servers exclusively from Intel.
Section IV.A.2 would prohibit Intel from conditioning a benefit on
an OEM's, ODM's, or End User's agreement to limit, delay, or refuse to
purchase a CPU, chipset, and/or GPU from a non-Intel supplier. For
example, Intel would be prohibited from conditioning a benefit to an
OEM on that OEM's agreement to delay the introduction of a computer
product incorporating a non-Intel product.
Sections IV.A.3 and IV.A.4 address threats to retaliate against an
OEM, ODM, or End User for doing business with a non-Intel supplier.
Section IV.A.3 would prohibit Intel from conditioning a benefit on
whether an OEM, ODM, or End User purchases, sells, or launches a CPU,
chipset, and/or GPU from a non-Intel supplier. For example, Intel could
not condition a benefit on an OEM's agreement to cancel a launch of a
Personal Computer that includes a non-Intel GPU. Section IV.A.4
prohibits Intel from withholding a benefit from an OEM, ODM, or End
User if it designs, manufactures, distributes, or promotes a product
incorporating a non-Intel CPU, chipset, and/or GPU. For example, Intel
could not withhold a benefit from an OEM because that OEM participated
in an AMD launch event.
Section IV.A.5 would prohibit Intel from directly or indirectly
conditioning a benefit on the share of CPUs, chipsets, and/or GPUs that
the OEM or End User purchases from Intel. For example, Intel could not
condition a benefit on an OEM's agreement to purchase at least 95
percent of its CPU requirements for commercial desktops from Intel. Nor
could Intel condition a benefit on an OEM's agreement to purchase no
more than 5 percent of its CPU requirements for commercial desktops
from a non-Intel supplier. In a market such as this one, where the most
realistic mode of competition by competitors to a monopolist involves
their selling initially modest quantities to direct buyers who also buy
large quantities from the monopolist, such conditioning can amount to a
tax on the growth of such competition, and can enable the monopolist to
sustain high prices at the same time as it limits competition and
decreases consumer choice.
Section IV.A.6 would prohibit Intel from bundling the sales of its
CPUs with its chipsets when the effective selling price of either piece
of the bundle is below Intel's Product Cost. Intel's Product Cost is
based on data maintained in the ordinary course of business by Intel,
is represented to be used by Intel for business decisions, and is
significantly higher than its average variable cost. The provision is
based on the standard articulated by the Ninth Circuit in PeaceHealth
and is administrable using that standard and the Product Cost data.
This provision is designed to target specific conduct alleged in the
Complaint. For example, the Complaint alleges that Intel bundled the
sale of its Atom x86 CPU and chipset in such a way that the effective
selling price of the chipset was below cost, in an effort to foreclose
third party vendors of chipsets. The provision does not reflect an
endorsement or adoption of PeaceHealth by the Commission as the
applicable legal test for bundling practices. The Commission expressly
retains the right to pursue independent claims against Intel or any
alleged monopolist under Section 2 of the Sherman Act or Section 5 of
the FTC Act based on a different legal standard such as (by way of
example), the standard articulated by the en banc decision in the Third
Circuit's LePage's case.\5\
---------------------------------------------------------------------------
\5\ Compare LePage' s, Inc. v. 3M Co., 324 F.3d 141, 155, 162
(3d Cir. 2003) (en banc) with Cascade Health Solutions v.
PeaceHealth, 515 F.3d 883 (9th Cir. 2008).
---------------------------------------------------------------------------
Section IV.A.7 would prohibit Intel from offering lump sum payments
to an OEM, ODM, or End User for reaching a
[[Page 48344]]
particular threshold of purchases from Intel. For example, Intel would
be prohibited from offering an OEM a $100 million rebate once it
purchases 5 million x86 CPUs. The retroactive nature of these payment
structures can disguise implicitly below-cost pricing that can unfairly
exclude equally efficient competitors and smaller entrants, resulting
in a loss of competition and harm to consumers. Intel, however, would
not be precluded from offering volume discounts on incremental
purchases above a particular threshold. For example, Intel could offer
an OEM a price of $100 for each CPU up to 1 million units and a price
of $90 for each CPU in excess of 1 million units. However, Intel would
not be permitted to offer a price below Product Cost for the excess
units. The Commission will carefully scrutinize Intel's implementation
of this provision to ensure it does not price its products in such a
way that forecloses competition.
2. Exceptions to the Commercial Practices Prohibitions
The exceptions to the prohibitions in Section IV.A are designed to
allow Intel to offer competitive pricing and enter into other
procompetitive deals with OEMs, ODMs, and End Users. These exceptions
permit conduct that may truly benefit consumers while still preventing
Intel from engaging in the type of anticompetitive behavior identified
in the Complaint. Nothing in these exceptions, however, would prevent
the Commission from pursuing independent claims against Intel under
Section 2 of the Sherman Act or Section 5 of the FTC Act if Intel
engages in practices that do not violate the Proposed Consent Order but
are nonetheless exclusionary or unfair and result in harm to consumers.
Under Section IV.B.1, Intel is not prohibited from conditioning a
Benefit on sales terms that are not expressly prohibited by the Order.
For example, Intel could offer a discount to an OEM for a CPU with the
condition that it is used in a laptop with a screen size of less than 9
inches.
Under Section IV.B.2, Intel is not prohibited from agreeing with an
OEM, ODM, or End User customer that the customer will use distinct
model numbers for Intel and non-Intel-based products. Similarly, Intel
can agree with its customers that the customer will not falsely label a
product based on non-Intel parts as based on Intel parts. The provision
allows Intel and OEMs to use naming schemes that are intended to avoid
customer confusion. For example, Intel could agree with an OEM that a
specific laptop model would be branded Laptop-100A if it uses an AMD
CPU and Laptop-100B if it uses an Intel CPU. However, this provision
would not allow Intel to condition benefits on an OEM's agreement not
to market or brand a product, which is explicitly prohibited by IV.A.3
and IV.A.4.
Under Section IV.B.3, Intel is not prohibited from meeting terms or
benefits it ``reasonably believes'' are being offered by a rival
supplier. This section does not immunize the offering of more favorable
terms and conditions than those offered by the competitor, i.e.,
predatory pricing. In addition, this exception is limited in that
Intel's offer must be limited to the quantity of the competitive offer;
it cannot be conditioned on exclusivity or share of the OEM's or end
user's business, and it must be limited to less than a year. Intel may
condition its bid upon the purchase of a minimum number of units. For
example, if Intel reasonably believes that a rival supplier is offering
to sell 10,000 CPUs for $90 to an OEM, it can offer to meet that price
so long as the OEM agrees to purchase at least 9,000 CPUs.
Sections IV.B.4 and IV.B.5 simply make explicit what is already
implicit in the Proposed Consent Order. Under Section IV.B.4., Intel
would not violate the Proposed Consent Order merely because it wins all
of an OEM's business, so long as it has not engaged in other conduct
prohibited by the Order. The fact that an OEM purchases a Relevant
Product or Chipset exclusively from Intel would not automatically
support a violation of the Proposed Consent Order. Under Section
IV.B.5, Intel would not violate the Proposed Consent Order if it
engaged in conduct not explicitly prohibited by the Proposed Consent
Order.
Under Section IV.B.6, Intel is not prohibited from offering volume
discounts directly to purchasers of computers in bidding situations.
Intel's offers must be in writing and must be responsive only to single
bids and not contingent on future purchases.
Section IV.B.7 would permit Intel to make supply allocation
decisions during times of shortage so long as it does not use that
process to retaliate against an OEM that is using non-Intel CPUs,
chipsets, or GPUs. For example, Intel could not withhold chipset supply
from an OEM to punish that OEM for using AMD CPUs.
Section IV.B.8 would allow Intel to enter into no more than ten
exclusive agreements over the next ten years when it provides an OEM
with ``extraordinary assistance'' under certain circumstances. The
Commission recognizes that Intel has worked with OEMs and other
customers to create innovative products that have benefitted consumers.
The Commission wants to ensure that Intel has the opportunity to
continue to invest monies in projects with OEMs and other customers to
support future innovations. Intel, like any other firm, will only
invest in research and development if it achieves a return on that
investment. Section IV.B.8 recognizes that in ``extraordinary''
circumstances Intel should be able to negotiate exclusivity for a
specific product in which it has invested research and development
resources with an OEM or other customer. At the same time, the
Commission is wary of creating a loophole to the Proposed Consent Order
that can be exploited by Intel to eviscerate the prohibitions in
Section IV.A. Thus, this provision is carefully limited.
First, Intel's ``extraordinary assistance'' to an OEM must be
valued at greater than $50 million and must not be made generally
available to all customers. For example, the payment cannot simply take
the form of marketing funds that are given to several OEMs but instead
must be a unique offer to a particular OEM. Second, the ``extraordinary
assistance'' must be intended to enable a customer to develop new and
innovative products or sponsor an OEM's entry into a new market segment
where the OEM did not previously compete. For example, a payment of $50
million to an OEM in return for that OEM's agreement to use Intel's
newest CPU in its laptop lines would not qualify as ``extraordinary
assistance.'' Third, in return for investing in new product development
with a particular OEM, Intel may ask for a period of limited
exclusivity of no more than 30 months to recoup its investment. Fourth,
Intel would only be able to seek exclusivity for the specific segment
or specific product in which it has offered the ``extraordinary
assistance.'' For example, if Intel offered ``extraordinary
assistance'' to an OEM to develop a new server it could only seek
exclusivity for that particular product line, it could not seek
exclusivity for other servers or other computer products manufactured
by that OEM. Fifth, any agreement regarding ``extraordinary
assistance'' must be in writing and include the terms of the
assistance, investment, and exclusivity. Finally, Intel would not be
permitted to enter into more than 10 arrangements that meet this
limited exception over the 10-year duration of the Proposed Consent
Order. Exclusive dealing is harmful to the extent that it forecloses
[[Page 48345]]
an important distribution channel; well-justified exclusive dealing
with (on average) just one or two of the Tier 1 OEMs is unlikely to do
so.
Section IV.B.9 allows Intel to insist that a Customer maintain the
confidentiality of Intel's confidential business information.
Section IV.B.10 allows Intel to offer buy ten, get one free
promotions to its smaller customers. The exception is literally limited
to sales of fewer than 11 products. For example, Intel would not be
allowed to multiply such an offer a thousand-fold. Thus, this exception
would not allow Intel to offer an OEM the opportunity to buy 10,000
units and get 1,000 free.
F. Prohibition on Explicit Predatory Design
Section V of the Proposed Order would prohibit Intel from designing
or engineering its CPU or GPU products to solely disadvantage
competitive or complementary products. This provision addresses
allegations in the Complaint that Intel engaged in predatory innovation
by cutting off competitors' access to its CPUs and slowing down various
connections to the CPU. The Proposed Consent Order would be violated if
a design change degrades performance of a competitive or complementary
product and Intel fails to demonstrate an actual benefit to the Intel
product at issue. For example, Intel could not introduce a design
change in its CPU that degrades the performance of a competitive GPU
unless it could demonstrate that the design change resulted in an
actual benefit to Intel's CPU. The benefit must be real - not simply a
theoretical benefit. Nor can the benefit to Intel be simply the fact
that the competitive product is rendered less attractive by the design
change (and thus enhances the competitive position of Intel's product).
The burden is on Intel to demonstrate that any engineering or
design change complies with the terms of Section V. However, Section V
does not require proof that a design change was made to intentionally
harm competitive or complementary products, or was otherwise
anticompetitive, nor does Section V require a balancing test that would
weigh the anticompetitive harms against the benefits of a particular
Intel design change; it is sufficient that there be actual benefits. A
balancing test would be appropriate in a legal challenge to an Intel
design change under Section 5 of the FTC Act or Section 2 of the
Sherman Act. As noted earlier, the Commission retains the authority to
challenge any Intel design changes that are not prohibited by this
provision of the Proposed Consent Order.
G. Assurances on the Accuracy of Intel Roadmaps
The provisions in Section VI address allegations in the Complaint
that Intel misrepresented its roadmap to the detriment of competition.
Section VI.A would prohibit Intel from disclosing inaccurate or
misleading roadmaps for the 10-year duration of the Proposed Consent
Order and would require Intel to respond, and do so truthfully, to any
inquiries regarding potential roadmap changes for one year after it
discloses its roadmap. Section VI.A does not require that Intel
disclose its roadmap in the first instance; rather, it places
conditions on disclosure in the event that Intel does so. Section VI.B
would require Intel to disclose to NVIDIA, on an annual interval, what
bus interfaces its platforms will use through 2015.
Together, these provisions address allegations in the Complaint
that Intel misled third parties concerning its interface roadmap.
Reliable disclosure of Intel's interface roadmap will help to eliminate
uncertainty about the availability of connections and interoperability
with Intel platforms. With reliable roadmap information, competitors
that design, manufacture, or sell products that rely on
interconnections with Intel platforms will be able to make informed and
confident decisions about resource allocation and research and
development efforts. Similarly, Intel customers that receive Intel
roadmaps will be able to count on the continuing accuracy of those
roadmaps and develop products based on combinations of Intel and non-
Intel parts. The provisions would help give NVIDIA, AMD/ATI, and other
potential manufacturers of products that would interconnect with
Intel's platform, assurances that they will be able to connect with the
CPU in the future and will also allow continuing development of GP-GPU
computing.
H. Compiler Disclosures
Section VII would require Intel to take steps to prevent future
misrepresentations related to its compilers and libraries, which are
used by software developers to write software and make it work
efficiently. Intel's compilers and libraries, however, may generate
different software code depending on the vendor of the CPU on which
software is running. For example, when the software code runs on an
Intel-based computer, it may use certain optimizations such as advanced
instruction sets or faster algorithms. However, when that same software
code runs on a non-Intel-based computer that has the same
optimizations, it may not use those optimizations. Intel's compilers
and libraries thus may disable functionality and performance available
on non-Intel CPUs. The disclosure requirements in Section VII provide
software developers with non-misleading information regarding the
extent to which Intel's compilers and libraries optimize differently
for different vendors' CPUs. These disclosures allow software
developers to make more informed decisions about their use of Intel
compilers and libraries, such as whether to investigate the types of
optimizations disabled on non-Intel CPUs, whether to use any methods to
override the code dispatch mechanisms in Intel compilers and libraries,
and whether to use Intel compilers and libraries at all.
Section VII applies to Intel ``Compilers,'' which includes all
Intel compilers, runtime libraries supplied with those compilers, and
other libraries supplied by Intel for use with Intel and non-Intel
compilers. Libraries are pre-compiled code or sample code provided to
software developers for use in their programs. Because Intel could
implement CPU vendor-based code dispatching in either compilers or in
libraries, the disclosures required in Section VII must apply to both.
Section VII.C of the Proposed Order requires Intel to inform its
customers when and how its compilers and libraries optimize for Intel
processors but not for non-Intel processors that are capable of using
such optimizations. If Intel's compilers or libraries optimize for a
standard instruction, such as SSE3, only for Intel CPUs but not for
compatible AMD or Via CPUs, even in some circumstances, Intel must
clearly and prominently disclose the extent to which the standard
instruction set is not used and which instruction set is used instead.
Section VII.C would also require Intel to disclose when its compiler
performs other optimizations only on Intel CPUs but disables the same
features on other CPUs that support the features.\6\
---------------------------------------------------------------------------
\6\ Although compiler users will not know which precise
optimizations are not available on non-Intel CPUs, they will be on
notice that their compiler will not fully optimize for non-Intel
CPUs.
---------------------------------------------------------------------------
Intel also would be required under Section VII.D to notify its
customers and implement an Intel Compiler Reimbursement Program that
includes a $10 million reimbursement fund from which Intel would
reimburse customers who relied on Intel's statements
[[Page 48346]]
regarding its compilers or libraries for the costs associated with
recompiling their software using non-Intel compiler or library
products. A customer seeking to use the Intel Compiler Reimbursement
program must describe an Intel statement on which it relied to ensure
that the program is used by customers who were misled by Intel's
disclosures.
Section VII.E of the Proposed Consent Order prevents Intel from
making claims about the performance of its compiler unless Intel has
substantiated that those claims are true and accurate using accepted
analytical methods. This prohibition seeks to prevent Intel from
claiming, without substantiation, that its compiler and libraries are
superior to other available compilers and libraries. Intel may not
claim to have superior compilers and libraries for AMD CPUs, when other
products, such as the GNU C Compiler (GCC) or AMD's Core Math Library
(ACML) have better performance in some circumstances. This prohibition
is particularly important regarding Intel's representations about
performance of its compilers on non-Intel CPUs. This section ensures
that Intel will provide the appropriate disclosures when it makes
performance claims about its compilers and libraries.
I. Benchmark Disclosures
Section VIII would require Intel to make disclosures concerning the
reliability and relevance of performance claims based on benchmarks.
The provision requires Intel to notify any customers, whether hardware
manufacturers or end consumers, that the performance tests may have
been optimized only for Intel CPUs. Intel must make disclosures
whenever it makes performance claims comparing its CPUs to competitors'
processors and whenever it relies on a benchmark. The provision
requires disclosures in all advertising or marketing materials that
include performance claims, including presentations, audio-visual
advertisements, and in prominent locations regarding performance on
Intel's web site. The required disclosure will inform consumers and
OEMs that certain benchmarks may not provide accurate performance
comparisons with non-Intel CPUs. The provision will encourage consumers
and OEMs to use benchmark results carefully and rely on multiple
benchmarks in order to get accurate performance information about CPUs.
The provision will thus help provide for more informed purchasing
decisions.
J. Compliance Terms
Sections IX through XIII of the Proposed Consent Order contain
reporting, access, and notification provisions that are common in the
Commission's orders, and are designed to allow the Commission to
monitor compliance with the Proposed Consent Order. Section IX permits
the Commission to appoint Technical Consultants to assist in assessing
Intel's compliance with several provisions of the Proposed Consent.
Such consultants are warranted in light of the technical nature of the
products at issue and the potential complexity of some compliance
issues, including cost accounting, microprocessor design, and software
design. Intel would be required to pay for the Technical Consultants,
up to a total of $2 million during the ten-year period of the Proposed
Consent Order.
Section X would require Intel to submit to the Commission a written
plan explaining what Intel has done and will do to ensure compliance
with the Proposed Consent Order. Intel would also be required to submit
annual reports for six years explaining how it has complied with the
Proposed Consent Order. Intel would be required, in these reports, to
submit to the Commission any communications Intel receives from its
customers regarding compliance with the Proposed Consent Order,
including complaints that it is violating the Proposed Consent Order.
Sections XI and XII would require Intel, for the next five years,
to retain its written sales contracts and to allow the Commission
access to Intel's records and employees. Section XIII would require
Intel to notify the Commission at least thirty days prior to changes in
corporate structure that would impact Intel's compliance provisions,
such as Intel being purchased by another company or Intel creating or
purchasing corporate subsidiaries.
Paragraph XIV provides that the Proposed Consent Order shall
terminate ten (10) years after the date it becomes final.
By direction of the Commission, Commissioner Kovacic recused.
Donald S. Clark
Secretary.
[FR Doc. 2010-19694 Filed 8-9-10; 7:10 am]
BILLING CODE 6750-01-S