Intel headed to pricing talks with U.S. regulators

CIOL Bureau
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WASHINGTON, USA: Intel Corp will meet with U.S. regulators with an eye to changing its price structure as the world's largest chip maker tries to put its antitrust troubles behind it, an Intel spokesman told Reuters on Tuesday.


Rivals Advanced Micro Devices and Nvidia Corp have accused Intel of unfair pricing, particularly in giving big price breaks to customers who only buy Intel chips. Intel last month agreed to pay $1.25 billion to AMD, which will withdraw all its regulatory complaints against Intel, but pricing disputes between the two remain unresolved.

Intel's goal is to resolve private and government legal battles on three continents.

In addition to discussions with FTC officials about its settlement with AMD, Intel plans to take the talks a step further.


"We will likely talk to regulators about ... pricing schemes and AMD is free to make their view known to regulators," said Intel spokesman Chuck Mulloy.

"We will not agree with AMD on pricing," said Mulloy, noting that it would be a violation of antitrust law for rival companies to set prices together.

He declined to say when the talks with regulators would take place.


The Federal Trade Commission is investigating Intel for breaking antitrust law, with three of the four commissioners prepared to vote to file a complaint, according to sources who asked not to be named because they were not authorized to speak about the matter. A fourth recused himself, the sources said.

Intel's rivals had criticized pricing strategies like retroactive discounts, end-user discounts and so-called bid buckets.

Intel's competitors in the $280 billion chip market have said that bid buckets, discounts offered to Intel customers facing tough competition from rivals using AMD processors, and end-user discounts, given to customers in hopes of making future sales, are used to push chip prices below the price of production. Retroactive discounts are granted once a company's purchases hit a certain volume.


Intel makes 80 percent of the world's central processing units, the brains of personal computers, and has been accused of acting illegally to maintain that dominance.

The talks are part of an effort by Intel to end years of legal wrangling over antitrust complaints.

One day after announcing the AMD settlement on Nov. 12, Intel hired noted Washington antitrust attorney Douglas Melamed as its new general counsel.


Melamed will have plenty on his plate.

With AMD no longer complaining to the agency, the FTC is believe to be listening to graphics chip maker Nvidia, whose chief executive Jen-Hsun Huang has called Intel's chip pricing unfair.

Nvidia makes graphics chips that pair with Intel's low-powered Atom in lower-priced netbook computers. Huang has complained that Intel sells an Atom chip by itself for $45, but sells a three-chip set for $25 to lure business away.


In early November, New York Attorney General Andrew Cuomo filed suit against Intel, accusing it of threatening computer makers and paying billions in kickbacks to maintain its market dominance.

Regulators in Asia and Europe have taken action against Intel because of its pricing incentives.

In Brussels, the European Commission, which enforces antitrust law in Europe, fined Intel $1.2 billion in May 2009 and ordered it to change certain business practices.


In June 2008, South Korea fined Intel some $26 million, finding it offered rebates to PC makers in return for not buying AMD microprocessors.

Japan's trade commission concluded in 2005 that Intel violated the country's anti-monopoly act.

In 1999, the FTC and Intel settled charges that the chip maker used its market power to defend its dominance of the microprocessor market.