Intel under federal microscope over claims of anti-competitive practices

Intel is the undisputed king of the micro-processor industry. Now under investigation for possible anti-competitive practices, it may be wondering if it is too big for its own good. David Usborne in New York examines the threat to the company.

Intel, the California-based colossus that supplies the chips for about 80 per cent of all personal computers world-wide, was facing possible turbulence last night after confirming it was under government investigation for possible anti-competitive practices and abuse of its dominant position.

The company, maker of the Pentium line of chips, confirmed that the Federal Trade Commission (FTC) in Washington had launched a formal investigation into its practices. Subpoenas for documents and relevant information have already been served on both Intel and other players in the industry.

It is the second time that Intel has been put under the federal microscope. An earlier FTC investigation was opened in 1991 but dropped two years later. In the meantime, the other big brother of the industry, Microsoft, has itself been under investigation since 1993.

The FTC informed Intel that it was looking into whether the company, headed by Andy Grove, was "acting to monopolise, attempt to monopolise, or otherwise restrict price or non-price competition in the development or sale of microprocessors or other computer components or related intellectual property".

While the launching of the investigation by no means guarantees eventual punitive action, it none the less casts a shadow across Intel, which will doubtless feel obliged to tone down its marketing practices pending an outcome. Shares in Intel were off slightly in morning trading in New York.

Scrutiny will focus in part on Intel's long-standing arrangements with many PC manufacturers whereby it pays a portion of their advertising costs if they agree to display the Intel logo or mention the familiar "Intel Inside" mantra as part of their spots.

To have opened the inquiry, the FTC must have received a formal complaint about Intel from a rival. "There is no shortage of people who could be behind it, " Linley Wennap, editor of the newsletter, Microprocessor Report, suggested yesterday. "At this point, Intel is the major supplier of virtually any semiconductor technology to the personal computer market".

It may stem from a nasty feud that has been under way for some months between Intel and Digital Equipment. Digital has accused Intel of stealing technology used in its own Digital Alpha microprocessor. In turn, Intel sued Digital asking for the return of documents giving technical details on its next generation of Pentium chips.