Antitrust Trial Opens Against Intel Turbulence

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March 05, 1999 (3:23 PM EST)

Antitrust Trial Opens Against Intel Turbulence

By Mary Mosquera,

It's a hectic and volatile time for Intel and there is no sign things will get calmer as the Federal Trade Commission prepares to take the chip maker to court Tuesday for antitrust violations.

In the last month alone, the company made a huge acquisition, lost two executives in a tragic slaying, rolled out its next-generation Pentium processor, and saw its lead in the chip market slip.

Thursday, Intel announced its largest ever acquisition. Moving to expand its reach in network and communications-related chips, the Santa Clara, Calif. chip giant offered $2.2 billion for Level One Communications. Intel executives said they expect more acquisitions to come.

The company also faced a loss earlier in the week when two of its executives were murdered in Uganda along with six other international tourists.

At the end of last month, Intel debuted its Pentium III chip. While the long-anticipated microprocessor offered more power and security, it also raised privacy fears among civil liberties groups. Two such groups filed complaints with the FTC over the microprocessor's personal serial number feature.

"The case adds additional (investment) risk to Intel, and stands to benefit PC makers and others who design products around Intel architecture," said Bill Whyman, Internet strategist at Legg Mason Precursor Group in Washington, D.C.

The FTC's case is narrow, alleging Intel used its monopoly in microprocessors to extract new technologies -- royalty-free -- from three of its customers and potential competitors and then denied them access to technical information they needed to develop products.

Compaq, Digital Equipment and Intergraph filed patent infringement suits against Intel. Huntsville, Ala.-based Intergraph is still in litigation. Intel does not deny that it withheld data, but said it has a right to decide with whom it does business.

Both the government and Intel have said they would avoid the combativeness and high-profile spin doctoring outside the courtroom, which has been a big part of the Microsoft antitrust trial.

Still, Intergraph Chief Executive Jim Meadlock said any battle with Intel is "war."

The Department of Justice and 20 states began its case against Microsoft in September but has recessed until mid-April. The Intel trial begins March 9 and is expected to last about 10 to 12 weeks.

Chief Administrative Law Judge James Timony, who will hear the case, has been with the FTC since 1959. Richard Parker is the lead government attorney and the FTC's senior deputy director of the Bureau of Competition since May. Parker has been a partner at the Washington, D.C. office of O'Melveny & Myers, a Los Angeles-based firm, where he has practiced since 1975. The law firm has also represented AMD, Intel's chief rival. Leading the Intel defense is Robert Cooper, of Los Angeles-based firm Gibson Dunn & Crutcher.