The Sleeping Giant Awakes

It was announced that the Federal Trade Commission has filed suit against Intel, and though no one was taking it lightly, apparently we did not realize the extent to which the newest incarnation of the FTC was upset about the goings on of the last decade.

A story on Betanews this morning lets us know that this FTC is not the one that many once wondered about; questioning if the entity was asleep or completely oblivious to what was occurring in the United States.

Clearly choosing the path of minimum compromise, the US Federal Trade Commission this morning voted to press antitrust charges against Intel, in an action that now parallels that of the European Commission, as well as the state of New York.

The principal charges are those we’ve covered here before, and which are also at the root of the EC’s case, among them that Intel entered into near-exclusivity or exclusivity arrangements with Dell and Hewlett-Packard. According to the terms of those arrangements (which may or may not be legally considered “agreements” since they apparently were not entirely on paper), the OEMs promised to purchase mainly Intel parts in particular market segments, in exchange for preferential pricing and rebates (or programs that had the same effect as rebates).

Does anyone else get the picture in their mind of an agreement in the style of those brokered on “The Sopranos” when they read this? When you are a behemoth  such as Intel, it is hard to imagine it not appearing something like that, though your name might be Michael Dell – the godfather of the CPU can certainly put the squeeze on you, for a number of reasons. In the case of Dell, though the company might want to offer exclusively AMD CPUs (it never has), it cannot, because AMD could not be counted upon for the volume of CPUs needed. (This is precisely one of the reasons why AMD, at the time of the first Opteron, could not have grown more against Intel, exclusive of the tilted playing field that was the market then.)

But to those charges today, the FTC added an unexpected dose of venom — a tone completely opposite to that of the Bush-43 era FTC, which at times died down to such a lull it was difficult to tell whether the Commission had dropped its case. At the heart of the FTC’s claim today is a broader allegation: that Intel found itself to be technologically inferior to AMD, and that it concluded it could only regain its footing through anti-competitive behavior.

“In 1999 after AMD released its Athlon CPU and again in 2003 after AMD released its Opteron CPU, Intel lost its technological edge in various segments of the CPU markets. Original equipment manufacturers (‘OEMs’) recognized that AMD’s new products had surpassed Intel in terms of performance and quality of the CPU,” reads this morning’s complaint from the FTC. “Its monopoly threatened, Intel engaged in a number of unfair methods of competition and unfair practices to block or slow the adoption of competitive products and maintain its monopoly to the detriment of consumers. Among those practices were those that punished Intel’s own customers — computer manufacturers — for using AMD or Via products. Intel also used its market presence and reputation to limit acceptance of AMD or Via products, and used deceptive practices to leave the impression that AMD or Via products did not perform as well as they actually did.”

The complaint alleges that Intel entered into deals with Dell, HP, and others as a first-strike response to the technological threat from both AMD and Via, a player whose name has been forgotten in recent years.

This is something many knew, yet no one was willing to voice. The simple utterance of these words must be like salve to the wounds of many at AMD; it must be a wonderful feeling to know that the FTC was not totally oblivious during that time period, no matter what otherwise might show from the outside.

Though the author above labels it venomous, I don’t. I say that it is about time someone took a serious look at history and did not try using revisionist tactics with an Intel slant.

All one has to do is look at any review of the Opterons of that era, and later the Athlon 64s. AMD was as far ahead on performance terms as Intel is ahead of AMD today – in roughly the same ways. It had chips that were far more efficient, and were turning out numbers that were superior to those of Intel, though coming from a chip running at 800MHz to 1.2GHz slower clock speed.

More than that, the 64 bit extensions that AMD had established were firmly enough in place that Intel had to capitulate, and could not change the path of the digital river by introducing its own 64 bit methods.

The article shows that the FTC is covering new ground, moving beyond the charges in the suits filed by the EU or the state of New York.

But in a completely new set of charges, the FTC is adding fresh allegations that many did not see coming. Among them:

  • Intel is currently, actively engaged in manipulating the design of CPUs so as to limit the development of CPU/GPU hybrid technologies to favor Intel’s graphics parts. Specifically, the FTC charges Intel with “adopting a new policy of denying interoperability for certain competitive GPUs,” and adds that it’s protecting its technology by “making misleading statements to industry participants about the readiness of Intel’s GPUs.” This suggests that the FTC may also have been investigating Intel’s conduct with regard to Nvidia, including the skirmish over whether Nvidia was licensed to produce chips for Intel’s Nehalem platform.
  • Intel is currently, says the FTC, bundling its chipsets with CPUs at below-cost pricing in an effort to drive Nvidia out of the chipset market, “resulting in below-cost pricing of relevant products in circumstances in which Intel was likely to recoup in the future any losses that it suffered as a result of selling relevant products at prices below an appropriate measure of cost,” as this morning’s complaint alleges.
  • Intel intentionally designed the interface between its CPU and chipsets so as to selectively, at a time of its own choosing, exclude Nvidia and ATI (through AMD) from attaining full interoperability with its CPU.
  • ADDED 11:08 pm: Intel developed interface standards such as USB and the high-def HDCP connection in such a way that it could take advantage of their specifications before anyone else: “In these instances, Intel encouraged the industry to rely on standards that Intel controlled and represented that the standards would be fairly accessible,” states the FTC’s complaint. “But Intel has delayed accessibility to the standards for its competitors so that Intel can gain a head start with its own products and wrongfully restrain competition. Intel’s conduct has no offsetting, legitimate or sufficient procompetitive efficiencies but instead deters competition and enhances Intel’s monopoly power in CPUs.”
  • The FTC claims Intel intentionally distributed C++ compilers and software libraries whose code would run slower on AMD CPUs than on Intel’s. This has been a minor concern of AMD’s now-dismissed legal case against Intel, which Intel has continually denied. Nonetheless, Intel did promise to continue not doing this sort of thing, in its settlement last month with AMD.
  • Intel published misleading benchmark claims, the FTC alleges — misleading in that they didn’t use real-world representations of performance, and that they were on occasion manipulated. “In truth and in fact, the benchmarks Intel publicized were not accurate or realistic measures of typical computer usage or performance, because they did not simulate ‘real world’ conditions, and/or overestimated the performance of Intel’s product vis-à-vis non-Intel products,” the complaint states, going on to use the phrase “false and misleading” to make the publication of tinted benchmarks the equivalent of fraud.
  • Intel publishes false and misleading white papers, including this one (PDF available here“), says the FTC: “Intel’s Web site includes a White Paper called ‘Choosing the Right Client Computing Platform for Public Sector Organizations and Enterprises.’ In the document, Intel stated that the ‘SYSmark 2007 Preview is a benchmark test that measures the performance of client computing software when executing what is designed to measure real-life activities.’ In truth and in fact, the benchmark was not designed to measure ‘real life activities,’ but to favor Intel’s CPUs.” SYSmark 2007 Preview is a benchmark produced by Business Applications Performance Corporation, which that firm says was developed in cooperation with both AMD and Intel, among others. Betanews located the offending passage as footnote 1 on page 3.

Now, we can add the cheers of nVidia to those of the ones coming from AMD.

The rest of the article speaks of the proposed remedies, none of which is sure to please Intel. It is definitely worth the read if you want to have an idea of what might be coming in the next few months to years.

The amazing thing about this is I find myself ready to pump the fist and cheer, like I have not for a government agency in some time. It is good to know that not everything escapes them, the way things seem to escape other arms of our government. There are some levels of injustice that are best dealt with by the government.

Fortunately, the FTC doesn’t have to be limited by the worry of an upcoming election like the people in our Congress are. It can operate using the facts, and be able to act on them accordingly.

I am not an Intel-hater, just like I’m not a Microsoft-hater. I do like to see fair competition, and know that if not for the contributions of smaller companies like AMD, VIA, and nVidia, we’d probably still be using chips that bleed energy like the P4s with NetBurst architecture, and suffering with i740 Intel graphics.

AMD, nVidia, and VIA all need to be the burrs under the saddle of Intel, otherwise it would ride lazily off into the sunset with all  of our money, and we’d be stuck several years behind where we would otherwise be at any given point in time.

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Personally, I would be delighted if there were a life after death, especially if it permitted me to continue to learn about this world and others, if it gave me a chance to discover how history turns out.

Carl Sagan

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  • http://www.facebook.com/greg.zeng Greg Zeng

    Love USA history: “below-cost pricing in an effort to drive Nvidia out of the chipset market” … to kill off genuine innovations. Not sure what you hate about bullies & cheats. They win, and history is the propaganda of the winners. :-(
    The only losers are the 99 per-centers. Just as well I’m counting the months before I go to ‘heaven’ … intelligent humanity never did have a chance on this planet.