Update: Japan's FTC warns Intel on processor sales

Japan's trade watchdog, the Fair Trade Commission (JFTC), suspects Intel's Japanese unit broke local antitrust regulations by offering incentives to major PC makers to limit their usage of processors from Intel's rivals, it said Tuesday.

"Intel is engaging in actions to keep CPUs made by competing companies from being used," the JFTC said in a statement. "(These actions) are substantially limiting the CPU sales sector for domestic personal computer makers."

The JFTC said that Intel's market share grew from 76 percent to 89 percent between 2002 and 2003 as a result of the practices.

The JFTC has been investigating Intel since last April and published its findings in a report on Tuesday. The recommendation also outlines a number of steps that it wants Intel to take.

Intel has 10 days, until March 18, to accept the JFTC's recommendations or risk further legal proceedings. The JFTC did not issue a monetary fine against Intel.

Intel continues to believe its business practices are both fair and lawful, it said in a statement issued shortly after the JFTC made public its finding. The Santa Clara, California, company said it is evaluating the JFTC charges and its recommendations before deciding on how Intel will respond.

Intel also questioned whether the JFTC had found any evidence of harm to consumers during its investigation.

Intel's largest competitor, Advanced Micro Devices Inc. (AMD), issued its own statement, applauding the JFTC and outlining the specifics of the JFTC decision.

According to AMD, the JFTC found that Intel negotiated proportions of non-Intel CPUs to be used within particular product families and used advertising support funds as a means for making Japanese notebook makers compliant.

Specifically, the JFTC found that one manufacturer was forced to agree to buy all of its CPUs from Intel, while another manufacturer was forced to keep its non-Intel purchases to 10 percent or less, AMD said.

The computer makers who were the subject of Intel's overtures have not been named by the JFTC, however, on the same day that the JFTC raided Intel's Japanese headquarters last year it also visited the offices of Sony, Fujitsu, and Toshiba in connection with the investigation.

The JFTC recommendations include requiring Intel to notify its customers and educate its employees that it may no longer provide rebates and other funds to Japanese computer manufacturers on conditions that exclude competitors' CPUs, AMD said.

Intel is also the subject of an ongoing inquiry by the European Commission, which last October asked four European Union countries why they appear to favor Intel processors in computers for public authorities.

"We are cooperating with the Japanese authorities," said Commission spokesman Jonathan Todd on Tuesday. "We have a similar investigation into Intel's practices."

In that case, the Commission is trying to determine why France, the Netherlands, Finland and Sweden issued tender requests to suppliers for computers containing Intel or equivalent microprocessors, or processors using a specific clock rate.

(Simon Taylor, in Brussels, contributed to this report.)