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FTC Does Its Part to Extend Depression


The Federal Trade Commission launched its long-expected Pearl Harbor attack on Intel today:

FTC Challenges Intel's Dominance of Worldwide Microprocessor Markets

FTC Charges Anticompetitive Tactics Have Stifled Innovation and Harmed Consumers

The Federal Trade Commission today sued Intel Corp., the world's leading computer chip maker, charging that the company has illegally used its dominant market position for a decade to stifle competition and strengthen its monopoly.

In its complaint, the FTC alleges that Intel has waged a systematic campaign to shut out rivals' competing microchips by cutting off their access to the marketplace. In the process, Intel deprived consumers of choice and innovation in the microchips that comprise the computers' central processing unit, or CPU. These chips are critical components that often are referred to as the "brains" of a computer.

According to the FTC complaint, Intel's anticompetitive tactics were designed to put the brakes on superior competitive products that threatened its monopoly in the CPU microchip market. Over the last decade, this strategy has succeeded in maintaining the Intel monopoly at the expense of consumers, who have been denied access to potentially superior, non-Intel CPU chips and lower prices, the complaint states.

"Intel has engaged in a deliberate campaign to hamstring competitive threats to its monopoly," said Richard A. Feinstein, Director of the FTC's Bureau of Competition. "It's been running roughshod over the principles of fair play and the laws protecting competition on the merits. The Commission's action today seeks to remedy the damage that Intel has done to competition, innovation, and, ultimately, the American consumer."

Notably, the Commission based its complaint solely on the FTC Act and not the Sherman Antitrust Act. This is important, because it keeps the entire proceeding inside the FTC's wheelhouse. The FTC will conduct a trial next year, and Intel will be found guilty two to four years from today.

There is no chance Intel will prevail before the FTC, as the commissioners control the discovery, judging, and initial appellate process. By 2015-2016, a federal appeals court will undo whatever damage the FTC tries to inflict (assuming Intel doesn't surrender before then). I've seen this movie before.

I don't have much to say on the "merits" of the FTC's complaint. All FTC cases come down to the same basic question: Should the FTC have more power? Here, the FTC wants the power to literally control every decision made by the computer chip industry. The FTC wants to decide how much market share a company may have, what contractual terms can be offered, what products may be distributed, etc. This case is the first step towards full "nationalization" of the tech sector, a long-held FTC goal.

Remember, the FTC does not operate under any constitutional or "democratic" constraints. None of the four commissioners who made today's decision were even appointed by the current president. (Curiously, the FTC waited until a day after Barack Obama's two FTC nominees appeared for their Senate confirmation hearings to announce the Intel complaint.) The FTC is not required to respect any provision of the Bill of Rights, and commissioners cannot be fired no matter how much taxpayer money they waste on this case. If those are the sort of people you want running the computer chip industry, then there's really nothing more I can say to you.

Of course, regardless of the outcome here, today's FTC attack will cause substantial short- and long-term damage to the economy. Firms in all industries are now on-notice that they need to divert significant resources away from meeting consumer demand and towards retaining expensive antitrust lawyers -- mostly former FTC and DOJ prosecutors -- to "protect" them from the next wave of attacks. Intel may defeat the FTC in court, but there will be a lot of "collateral damage" while the process plays out over the next decade.

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