AG Files Antitrust Lawsuit Against Intel

New York State Attorney General Andrew M. Cuomo has filed a federal antitrust lawsuit against Intel Corporation, the world’s largest maker of computer microprocessors. The suit charges that Intel violated state and federal anti-monopoly laws by engaging in a worldwide, systematic campaign of illegal conduct in order to maintain its monopoly power and prices in the market for microprocessors.

The charges allege Intel "abused its dominance of the computer-chip market" and noted that Cuomo's complaint "includes a raft of revealing emails between some of the technology industry's most powerful executives," according to the Wall Street Journal.

Over the last several years, Intel has extracted exclusive agreements from large computer makers in which they agreed to use Intel’s microprocessors in exchange for payments totaling billions of dollars. 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, Cuomo's office said.

“Rather than compete fairly, Intel used bribery and coercion to maintain a stranglehold on the market,” said Cuomo said in a press release. “Intel’s actions not only unfairly restricted potential competitors, but also hurt average consumers who were robbed of better products and lower prices. These illegal tactics must stop and competition must be restored to this vital marketplace.”

The suit, which was filed today in federal court, seeks to bar further anticompetitive acts by Intel, restore lost competition, recover monetary damages suffered by New York governmental entities and consumers, and collect penalties.

Intel’s illegal actions included the following, according to Cuomo:

Dell

• In 2006, Intel paid Dell almost $2 billion in “rebates,” and in two quarters of that year, rebate payments exceeded Dell’s reported net income.
• From 2001 to 2006, Intel granted Dell a privileged position vis-à-vis other computer makers in return for Dell’s agreement not to market any products from Advanced Micro Devices (“AMD”) (NYSE: AMD), Intel’s major competitor.
• Intel and Dell collaborated to market microprocessors and servers at prices below cost in order to deprive AMD of strategically important competitive successes.

Hewlett Packard

• Intel threatened HP that it would derail development of a server technology on which HP’s future business depended if HP promoted products from AMD.
• Intel paid HP hundreds of millions of dollars in rebates in return for HP’s agreement to cap HP’s sales of AMD-based products at 5% of its business desktop PCs.
• In 2006, Intel and HP entered into an broader, company-wide agreement to pay HP $925 million to increase Intel’s shares of HP’s sales at AMD’s expense.

IBM

• Intel paid IBM $130 million not to launch an AMD-based server product.
• Intel threatened to pull funding for joint projects that benefited IBM if IBM marketed AMD-based server products.
• Intel pressured IBM to launch another AMD-based server only on an “unbranded” basis.