Intel gets extension on Japan antitrust warning

Kiyoshi Takenaka

TOKYO: Intel Corp. said that Japan's antitrust watchdog had extended by two weeks its deadline for the chip maker to state whether it will challenge a monopoly warning, leaving the U.S. company's rivals and European regulators on tenterhooks.

The Fair Trade Commission said last week that Intel's Japanese unit had squeezed out Advanced Micro Devices and Transmeta from the Japanese market by offering rebates to PC makers that agreed not to buy or to limit their purchases of central processing units (CPUs) made by those competitors.

Intel, the world's largest chip maker, was originally required to respond to the warning by March 18. But the FTC extended the deadline to April 1 after the unit had asked for time to check the warning thoroughly.

An FTC official confirmed the extension, saying it was not uncommon for the commission to grant extra time.

Acceptance of the warning, which has two parts -- fact findings and an order to cease and desist -- would mean the unit is legally obliged to scrap the practices in question.

If Intel challenges the warning, a court-like body set up by the FTC will review the matter. If the company is still dissatisfied with the results, it can appeal to a high court.

The whole process could last several years or longer.

Intel's decision is being closely watched by smaller rivals such as AMD, which had welcomed the FTC warning.

The share of AMD's CPUs in the Japanese PC market tumbled to 10.4 percent in 2004 from 22.2 percent in 2002 -- the year when, according to the FTC findings, Intel's Japanese arm started offering unfair rebates, data from research firm Gartner shows.

Over the same period, Intel's share in Japan rose to 87 percent from 73.2 percent.

"By preventing PC manufacturers from using CPUs of their choice, Intel's misconduct deprived consumers worldwide of the freedom to purchase computers that best fit their needs," AMD had said in a statement.

GLOBAL IMPACT

Following the FTC warning, Intel, which sold $3 billion of chips to Japan last year, said its business practices were fair and lawful and expressed concerns the FTC's finding was not based on antitrust principles commonly accepted worldwide.

Both companies wove a global perspective into their comments as a similar probe is looming in Europe -- a market more than twice as large as Japan for Santa Clara, California-based Intel.

Immediately after the FTC warning on March 8, the European Commission said it was investigating Intel for possible antitrust violations, in cooperation with the Japanese authorities.

If history is any guide, Intel could first challenge the Japanese and then try to compromise once it sees how the case is shaping up.

It took a similar strategy with the U.S. Fair Trade Commission, which went after Intel in the late 1990s for threatening to withhold critical technical information from customers who sued it for patent infringement.

Intel disputed the U.S. FTC's findings, but just before a big court case, agreed to a compromise.

The warning from the Japanese antitrust body was its second such action against a computer industry giant following a similar move against Microsoft Corp. last July.

Microsoft, the world's largest software maker, chose to challenge that warning on the spot and the matter is being reviewed at the court-like body.

(Additional reporting by Daniel Sorid in San Francisco)