Nearly eight months after issuing a complaint against Intel Corp. for unfair competition under Section 5 of the FTC Act (See FTC Moves Forward with Stand Alone Section 5 Claim), the FTC announced last week that it has reached the terms of a settlement with Intel. The settlement (Decision and Order) is subject to public comment. In reaching the terms of this settlement, the FTC noted that the settlement does not strip Intel of its alleged monopoly in the x86 CPU processors, because that alleged monopoly was obtained through its innovation. Rather, the settlement is designed to address Intel’s commercial conduct moving forward in an effort to aid competition in that and other alleged markets.
“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.” (Analysis of Proposed Consent Order to Aid Public Comment)
The settlement appears, though, to reflect a number of concessions by the FTC. As noted, the settlement does not immediately alter Intel’s alleged monopoly status with the x86 CPU processors. Moreover, certain of the requested relief sought in the complaint is not reflected in the settlement, such as providing notice to the FTC of acquisitions in the future. Other relief sought in the complaint, which was broad and categorical, has been refined and narrowed in the settlement. Indeed, an entire section of the settlement expressly carves out exceptions to the restrictions imposed on Intel’s commercial conduct in the future (see Section IV.B.). For example, the FTC tries to strike a balance with the limitations to be imposed on Intel in entering exclusive contracts with OEM’s in the future. In the complaint, the FTC had sought to limit Intel’s practices in entering into these exclusive contracts. In the settlement, the FTC obtained those limitations while making it clear that it was not banning the practice entirely.
“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.”
“By accepting this settlement, we open the door to competition today and address Intel’s anticompetitive conduct in a way that may not have been available in a final judgment years from now. Everyone, including Intel, gets a greater degree of certainty about the rules of the road going forward, which allows all the companies in this dynamic industry to move ahead and build better, more innovative products.”
Clearly, for the FTC, the settlement was “the bird in the hand,” and was more valuable than trying to find two birds later in a bush that is ever changing.