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First reactions to the Intel Settlement

I just finished watching the FTC webcast announcing the Intel settlement and did a quick read over the agreement itself. Some quick high-level reactions:

1. The tone of the press conference was triumphant, of course. Leibowitz claimed that the FTC got 22 out of 26 of the remedies proposed in the complaint and that Intel, which had previously criticized the proposed remedies as unprecedented, was suddenly making the remedies “precedented.” Further study required here, but it’s far too glib to count victory based on 22 out of 26. Many of the proposed remedies contained suggestive, open-ended language which, if interpreted reasonably expansively, would have gone far beyond this settlement.
2. To my ear, there was a big change in emphasis from the theory of the complaint. The complaint was predominantly about Intel’s exclusivity and rebating practices with customer with some deception theories thrown in to make it sound like a proper FTC case. The settlement is much more about intellectual property restrictions that prevent AMD and Via from outsourcing manufacturing when they become capacity constrained.
3. Section 5 of the FTC Act: Leibowitz made a special point of reiterating his view that Section 5 is “a penumbra around the Sherman Act.” I happen to agree with that view, but it’s an open question whether this settlement really advances this view. It’s notable that the FTC has brought several Section 5 cases in the last few years and hasn’t chosen to litigate any of them all the way. Not saying it’s a bad decision, just pointing out that the status of Section 5 remains open after this settlement.
4. Predatory design: This is an aspect of the settlement that I really can’t stomach. It makes me nervous to think that the FTC is going to have an open-ended right to decide that Intel’s design changes are predatory because they do not provide “any actual benefit” to the product. Benefits, like beauty, are often in the eye of the beholder.

More to follow.

Filed under: antitrust, business, contracts, federal trade commission, law and economics, markets, monopolization Tagged: Dan Crane, ftc, intel, Intel settlement, Leibowitz, Section 2, section 5

Full post as published by Truth on the Market on August 04, 2010 (boomark / email).