N.Y. attorney general files antitrust lawsuit against Intel

IDG News Service - New York Attorney General Andrew Cuomo has filed a federal antitrust lawsuit against microprocessor maker Intel, alleging that the company engaged in a "systematic campaign" of illegal conduct to protect a monopoly.

Cuomo's lawsuit, filed in U.S. District Court for the District of Delaware Wednesday, alleges that Intel extracted exclusive agreements from large computer makers and threatened to punish those perceived to be working too closely with Intel competitors.

Intel gave computer makers payments totalling billions of dollars in exchange for the exclusive agreements, and the company threatened to cut off payments to computer makers or fund their competitors when they worked with other microprocessor makers, the lawsuit alleged. Cuomo's lawsuit comes less than two weeks after news reports that the U.S. Federal Trade Commission is considering filing a formal complaint against Intel.

"Rather than compete fairly, Intel used bribery and coercion to maintain a stranglehold on the market," Cuomo said in a statement. "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."

Cuomo's lawsuit is a "duplication" of a 2005 lawsuit filed by Intel competitor Advanced Micro Devices, said Chuck Mulloy, an Intel spokesman. The complaints in Cuomo's lawsuit mirror the complaints in the AMD case, which is scheduled to go to trial in March, he said.

In that case, Intel and AMD have exchanged more than 200 million documents, and the two sides have conducted about 2,200 hours of depositions, Mulloy said. Intel is focused primarily on the AMD lawsuit, he added.

"Neither consumers, who have consistently seen lower prices and innovation, nor justice is being served by bringing this case now," Mulloy said. "We will defend ourselves."

Intel paid hundreds of millions, and in some years billions, of dollars a year in so-called rebates to computer makers, including Dell, Hewlett-Packard and IBM, the lawsuit alleges. Cuomo called the rebates "payoffs with no legitimate business purpose" for computer makers to use Intel products.

The payments for exclusive deals that Intel provided could, in some cases, make the difference between a profit and loss for some computer makers or segments of their businesses, Cuomo alleged. In some cases, the payments from Intel exceeded a company's reported quarterly net income.

In 2006, Intel paid Dell nearly $2 billion in rebates, and in two quarters of that year, rebate payments exceeded Dell's reported net income, the attorney general's office said in a press release.

Intel threatened HP that it would derail development of a vital server technology if HP promoted products from AMD, the lawsuit alleges. Intel also paid hundreds of millions of dollars in rebates in return for an HP agreement to cap sales of AMD-based products at 5% of its business desktop PCs, the lawsuit alleged.