Intel settles antitrust suit with wrist slap

NEW YORK (CNNMoney.com) -- Intel Corp. settled antitrust charges levied by the Federal Trade Commission on Wednesday, but analysts expect the agreement will do little to change the microchip marketplace.

The chipmaking giant did not acknowledge any wrongdoing or even admit that the facts alleged by the regulator were true, and it settled without paying a fine. The FTC does not have the authority to levy a financial penalty on a company abusing a monopoly position.

As part of the deal, Intel agreed not to engage in payments or other activities that are designed to force its competition out of the market. The company said it will clearly disclose how its compiler technology treats competing products, and it set up a $10 million fund to help business customers recompile software that Intel corrupted to work more slowly on rival's chips.

"Intel is a great American success story, and we want that to continue," said Jon Leibowitz, the FTC's chairman. "The conduct documented in our investigation happened in the past. This settlement will allow Intel and the marketplace to move forward."

The FTC, which filed its complaint in December 2009, charged Intel with systematically shutting out rivals from the microchip market. Intel was accused of refusing to sell chips to some computer manufacturers that also bought chips from Intel's rival AMD (AMD, Fortune 500) and paying other manufacturers rebates in exchange for promises not use microchips manufactured by Intel's competitors.

The alleged payments were substantial: A separate Securities and Exchange Commission investigation revealed that Intel's payments to Dell (DELL, Fortune 500) alone totaled $4.3 billion between 2003 and 2006.

The complaint also accused Intel of purposefully making software that was built on Intel compilers work more slowly on computers running AMD processors. The FTC found that Intel surreptitiously made it look like that slowdown was AMD's fault, even though in some instances AMD's chips were better than Intel's.

Several industry analysts and antitrust law professors noted that previous fines and settlements have already caused Intel to dial back some of the practices that it agreed not to partake in as part of the FTC settlement.

"I'm not convinced that these will have that big of an impact in the market today," said Steve Kleynhans, microprocessor industry analyst at Gartner. "A lot that's talked about in the settlement as 'anticompetitive practices' are things that Intel already agreed with AMD to not to do -- and even at that time they agreed not to do them, they were not currently in practice."

Keith Hylton, professor at the Boston University School of Law, said he felt that the FTC would have had trouble making its case at trial. Still, he and other academics said that the settlement establishes a kind of "informal law" that will likely give Intel and others pause before they take similar actions in the future.

"The FTC has set a tone that it is going to vigorously enforce behavior that is not justifiable by a monopolist," said Maurice Stucke, law professor at the University of Tennessee. "It says that there is no sound business reason to decieve other market participants."

Intel said it agreed to the settlement terms so that it could return its focus to normal operations. The deal moves Intel closer to tying up all the legal loose ends from its years of alledged misconduct: No other U.S. federal agencies are publicly investigating the company for antitrust issues.

"The settlement enables us to put an end to the expense and distraction of the FTC litigation," Doug Melamed, Intel's general counsel, said in a prepared statement.

Intel has now paid just over $2.7 billion in settlements and fines for using its dominant market position to bully chip customers into exclusively buying its products. The European Union's Intel probe culminated in a record $1.45 billion fine, levied in May 2009. According to the EU investigation's findings, Intel gave rebates or direct payments to Dell, Hewlett-Packard (HPQ, Fortune 500), Lenovo, Acer, and NEC.

In November, Intel inked an peace treaty with AMD. The world's largest chipmaker paid its rival $1.25 billion and agreed to abide by "a set of business practice provisions." In return, AMD dropped all three of its pending lawsuits against Intel.

"In our settlement with Intel, AMD's critical remaining concern was Intel's use of all-or-nothing discounts to deny competitors' access to the marketplace," said Harry Wolin, AMD's general counsel. "The FTC's order clearly and firmly prohibits such abuse and guarantees ongoing monitoring of Intel's conduct."

Despite the lack of a financial penalty, the FTC said its settlement is farther reaching than Intel's previous penalties and reform agreements.

"This does go, in our judgment, significantly further than relief that's been obtained in some of the private disputes, and also in some of the international decisions," Leibowitz said. "Today's settlement gives certainty to all of those in the industry -- including, by the way, Intel --and clarifies the rules of the road. We believe we're going to see, or begin to see, a more competitive landscape very, very soon."

Wednesday's settlement brings Intel one step closer to resolving the issue. New York Attorney General Andrew Cuomo also has an ongoing investigation into Intel for antitrust violations.

Intel's stock price was unaffected by news of the settlement: Intel (INTC, Fortune 500) shares were essentially flat, at $20.74, in Wednesday afternoon trading.