New York Attorney General Slaps Intel With Antitrust Suit

The suit alleges that Intel "violated state and federal anti-monopoly laws by engaging in a worldwide, systematic campaign of illegal conduct -- revealed in e-mails -- in order to maintain its monopoly power and prices in the market for microprocessors," according to a statement from the New York attorney general accompanying the complaint.

Examples of such e-mails cited in the statement include an internal Hewlett-Packard e-mail stating that Intel planned "to 'punish HP" for launching servers based on Intel rival Advanced Micro Devices' Opteron processor, and a Dell e-mail that refers to Intel CEO Paul Otellini and Chairman Craig Barrett being "prepared for jihad if Dell joins the AMD exodus."

The lawsuit follows the lead of European and Asian antitrust regulators who have ruled against Santa Clara, Calif.-based Intel in recent years, with the New York attorney general charging the chip giant with abusing its dominant market position -- Intel controls roughly 80 percent of the global microprocessor market -- to stifle competitors such as AMD.

"Rather than compete fairly, Intel used bribery and coercion to maintain a stranglehold on the market," Cuomo said in a statement Wednesday. "Intel's actions not only unfairly restricted potential competitors, but also hurt average consumers who were robbed of better products and lower prices."

Intel was under investigation by the Federal Trade Commission twice in the 1990s, but those investigations were dropped without charges being filed.

"The New York attorney general's 83-page complaint, filed on behalf of New York State consumers and governmental entities, details explicit evidence of Intel's harm to US consumers and computer manufacturers. Stopping that illegal harm will serve the settled purpose of the American antitrust laws: ensuring that innovation is unconstrained and competition is free to serve consumers," said Tom McCoy, executive vice president of legal, corporate and public affairs at AMD, in a statement Wednesday.

Intel did not respond to inquiries about the New York attorney general's lawsuit.

"I think having a federal enforcer bring a significant case like this against Intel really changes the dynamics of the situation and of the potential outcome of the AMD litigation," said David Balto, a senior fellow at the Center for American Progress who served as an antitrust attorney with the FTC and the Antitrust Division of the Department of Justice.

AMD, based in Sunnyvale, Calif., has a separate antitrust lawsuit against Intel in Delaware that is scheduled to go to trial early in 2010. Balto said he expected the New York attorney general's lawsuit to be consolidated with AMD's Delaware suit and that such a case would move "swiftly" with a ruling in 12 to 18 months.

An AMD spokesman said Wednesday that the company "think(s) our U.S. civil case will wrap by summer."

European Commission regulators fined Intel a record $1.45 billion in May after ruling that the company had violated European Union antitrust rules by using "conditional rebates" to pressure computer makers and retailers to limit or eliminate the use of AMD microprocessors in their products. Earlier antitrust rulings against Intel by Japanese and South Korean authorities hinged on similar charges.

Intel is appealing the EC fine, claiming that EC investigators "refused to look at some of the evidence and in some cases refused to get some other evidence that was available."

In the new case brought by the attorney general's office, prosecutors allege that Intel "paid hundreds of millions of dollars annually -- and in some years billions of dollars -- in so-called 'rebates' to individual computer makers" in order to obtain "exclusive agreements from large computer makers in which they agreed to use Intel's microprocessors in exchange for payments totaling billions of dollars," according to the attorney general's statement.

Following a 23-month investigation that involved the examination of "millions of pages of e-mail messages and documents," the New York attorney general concluded that "Intel also threatened to and did in fact punish computer makers that they perceived to be working too closely with Intel's competitors. Retaliatory threats included cutting off payments the computer maker was receiving from Intel, directly funding a computer maker's competitors, and ending joint development ventures."

Specific charges in the suit involve some of the biggest names in the PC industry. For example, the charges include allegations that Intel paid Dell billions of dollars in rebates and "collaborated" with the Round Rock, Texas.-based computer maker "to market microprocessors and servers at prices below cost in order to deprive AMD of strategically important competitive successes."

The suit further alleges that Intel "paid IBM $130 million not to launch an AMD-based server product," and paid Hewlett-Packard "hundreds of millions of dollars in rebates in return for HP's agreement to cap HP's sales of AMD-based products at 5 percent of its business desktop PCs."