US sends message to IT industry to play fair

The FTC's settlement with Intel shows that US regulators are paying more attention to the tech sector

Wednesday's antitrust settlement between Intel and the U.S. Federal Trade Commission sends a strong message to IT companies not to exploit their dominance in a way that squashes competition or deprives consumers of choice, industry observers said.

The FTC's job is to enforce competition and protect the interests of consumers, and its case against Intel is a sign the agency intends to get more active in ensuring abuses don't occur, said Robert Lande, professor of law at the University of Baltimore School of Law.

The settlement sends the message: "If you're a monopolist, be careful," Lande said. "Just because you have a baseball bat doesn't mean you can hit people with it."

The FTC announced a broad settlement agreement Wednesday in its antitrust case against Intel. The terms prohibit the chip maker from providing benefits to PC makers in return for exclusively using its chips. That should promote competition and ensure access to a wider choice of products for computer buyers, FTC officials said during a press conference.

U.S. regulators have been paying closer attention to the computer industry since the late 1960s, when the Department of Justice filed its massive antitrust lawsuit against IBM. Nowadays, computers and technology have permeated almost every aspect of daily life, which is one reason why the FTC is scrutinizing the sector even more closely, Lande said.

The FTC's case against Intel was wide-ranging, he noted, covering graphics chips as well as CPUs, technology license agreements and even software compilers.

Jim McGregor, chief technology strategist at In-Stat, said the case was "more of a statement to the entire community ... that you need to start playing fair."

The next target in the FTC's sights could be Apple, McGregor speculated. The company appears to be unfairly restricting the options for downloading music and applications through its iPhone and iPad tablet computer, he said. Apple also prohibits developers from using some external tools like Adobe's popular Flash tools to create iPhone and iPad applications, he said.

U.S. regulators already are looking at whether Apple is shutting out third parties such as Google and Microsoft from selling ads on the iPhone and iPad, according to a recent Financial Times report. And on Monday, the Connecticut Attorney General's Office said it was looking at whether Apple and Amazon have struck anticompetitive deals with e-book publishers.

The FTC has also been keeping an eye on Google and Microsoft, which hold dominant positions in certain key technology markets. The FTC investigated Google's acquisitions of AdMob and Doubleclick, for example, ultimately clearing them both.

The Intel settlement and other enforcement actions "signal that the FTC is back in the hands of people who care about antitrust," said Charles King, principal analyst at Pund-IT.

Some questioned the effectiveness of the FTC's action, however. Thomas Lenard, president of the Technology Policy Institute, which is backed partly by Intel, said it was "questionable whether this settlement helps consumers or promotes competition."

"Overall, I am concerned that this order does the opposite of what antitrust enforcement is supposed to do and runs the risk of deterring behavior that is pro-competition and pro-consumer," he said in a statement.

Mercury Research analyst Dean McCarron questioned whether the settlement would really lead to lower prices for consumers. It prohibits Intel from using bundled prices to promote its CPUs and GPUs together, but those components will likely cost more when sold separately, he said, which could hike up prices for PCs.

Still, with technology becoming more pervasive in daily life, Lande said greater scrutiny from regulators is required.

"It was important 20 years ago, but it is more important today," he Lande said. "To the extent to which the FTC can make strides, it will be better for mankind."

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Tags legalintelantitrustUSA governmentU.S. Federal Trade Commission

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Agam Shah

IDG News Service
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