Can Lawyers Design Computer Chips?

by S.M. Oliva, Mises Economics Blog
Aug. 05, 2010

The Federal Trade Commission published its order against Intel today. Most of the order actually deals with intellectual property issues, a domain the FTC has progressively tried to wrestle away from the patent system and the courts. This order does bring the FTC one step closer to being the nation’s de facto IP regulator, but that is not the most noteworthy thing. That honor falls to this paragraph:

Respondent [Intel] shall not make any engineering or design change to a Relevant Product if that change (1) degrades the performance of a Relevant Product sold by a competitor of Respondent and (2) does not provide an actual benefit to the Relevant Product sold by Respondent, including without limitation any improvement in performance, operation, cost, manufacturability, reliability, compatibility, or ability to operate or enhance the operation of another product; provided, however, that any degradation of the performance of a competing product shall not itself be deemed to be a benefit to the Relevant Product sold by Respondent. Respondent shall have the burden of demonstrating that any engineering or design change at issue complies with Section V. of this Order.

Dan Crane commented, “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.” Crane suggested, “Benefits, like beauty, are often in the eye of the beholder.” Wait, value is subjective? Where have I heard that before?

But seriously, this is the victory the FTC was after. It can now veto individual product-design changes in Intel products, for any reason and without any outside review. It does not matter if the FTC never uses this power; the mere threat will require Intel and its competitors to divert additional resources away from actually developing new products and towards paying more antitrust lawyers and outside “consultants” who can lobby the FTC, either to encourage action against Intel or keep the regulators at bay. Antitrust is nothing more than a welfare system for lawyers who cannot otherwise provide a marketable good or service. The Intel order will keep more than a few of these individuals in middle-to-upper-class luxury for years to come.

UPDATE: Joshua Wright--a former FTC hack himself--has some cogent thoughts on other provisions of the Commission’s order, which is looking more and more like an outright nationalization (FTC-ization?) of Intel. Wright thinks Intel would have (eventually) prevailed in litigation. I tend to think he’s right. If I’m an Intel shareholder, I’m demanding some answers from management and the board.

2ND UPDATE: Not surprisingly, the in-bed-with-Leibowitz Washington Post runs an unabashedly pro-FTC news article on the order, which misleads readers into thinking the FTC legally found Intel guilty of antitrust violations. There was no such finding. In a “consent order,” there is no finding of law by the Commission or admission of guilt by the accused. The Post knows better yet chose to mislead its readers.