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In filing a federal antitrust lawsuit, Attorney General Andrew Cuomo accused Intel of using its market prowess to “rule with an iron fist.”
Intels chips act as the “brains” of 80 percent of the worlds personal computers. Cuomo said Intel paid billions of dollars in kickbacks to computer manufacturers and retaliated against those that did too much business with Intels competitors, namely Advanced Micro Devices Inc.
“Rather than compete fairly, Intel used bribery and coercion to maintain a stranglehold on the market,” Cuomo said in a written statement. “Intels actions not only unfairly restricted potential competitors, but also hurt average consumers who were robbed of better products and lower prices.”
An Intel spokesman, Chuck Mulloy, denied the latest charges, as the company has in the past, and said Intels sales practices were legitimate.
“We never threatened anyone,” he said.
At issue are the large annual rebates Intel pays to big customers. Intel has described the rebates as simple volume discounts, but some regulators have disagreed, saying they illegally penalize Intels customers for going with rivals products, namely chips from AMD.
AMD has been complaining to regulators for five years that Intel has broken antitrust laws to keep AMDs market share down. The company has found its most sympathetic ear abroad.
In May, the European Union fined Intel a record $1.45 billion, and last year Koreas Fair Trade Commission fined Intel $18.6 million. Intel is appealing both rulings. In 2005, Japans Fair Trade Commission found that Intel violated antitrust rules there. Intel accepted that ruling without admitting wrongdoing.
The U.S. Federal Trade Commission is also investigating. That probe might take on increased urgency considering the mounting charges and the Obama administrations pledge to pursue antitrust cases more vigorously than the Bush administration did.
The FTC has investigated Intel before for evidence of anticompetitive conduct, but the company emerged relatively unscathed.
The FTC dropped one probe in 1993, and after another probe accused Intel in 1998 of violating federal law by withholding technical information about its processors from computer makers with whom Intel was involved in patent disputes. Intel settled that case the following year.
Technology analyst Rob Enderle said Intel may be facing a harder fight this time. He said the company worked through its problems “elegantly” in the 1990s, but has become “much more combative” in the past decade in its dealings with regulators.
Cuomos lawsuit was filed in U.S. District Court in Wilmington, Del., the same arena in which AMD sued Intel four years ago, accusing the rival of anticompetitive behavior. A trial is scheduled to begin in a few months.
AMDs lawsuit quoted managers from Toshiba saying Intels financial incentives amounted to “cocaine.” It also said executives from Gateway complained that Intels threats of retaliation for working with AMD beat them “into guacamole.”
Mirroring AMDs accusations, Cuomo said Intels rebates were illegally designed to squash competition.
Computer maker Dell Inc. alone was paid almost $2 billion in such rebates in 2006, the state said, in exchange for an agreement not to market products from AMD.
Cuomo said Intel also resorted to “bullying” customers that didnt play along. Among other things, he said, Intel would threaten to end joint development ventures, and instead direct funding to a manufacturers competitors.