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NY Joins Antitrust Effort Against Intel

Photo: umjanedoan/Flickr (CC)

NEW YORK – New York’s attorney general hit Intel Corp. with an antitrust lawsuit Wednesday, claiming the company used “illegal threats and collusion” to dominate the market for computer microprocessors.

Following a similar case in Europe, Attorney General Andrew Cuomo claimed that the world’s biggest computer chip maker paid billions of dollars in kickbacks to computer manufacturers and retaliated against those that did too much business with Intel’s competitors, namely Advanced Micro Devices Inc.

Intel used its market prowess to “rule with an iron fist,” Cuomo said.

“Rather than compete fairly, Intel used bribery and coercion to maintain a stranglehold on the market,” Cuomo said in a written statement. “Intel’s 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 charges and said the company’s sales practices were legitimate.

“We never threatened anyone,” he said.

The lawsuit, filed in U.S. District Court in Wilmington, Del., is the latest in a string targeting Intel’s practice of paying large annual rebates to big customers.

Intel has described the rebates as simple volume discounts, but some regulators have disagreed. The European Union fined the company $1.45 billion in May, a decision Intel is appealing to EU courts.

Intel’s closest competitor, AMD, sued Intel in the same court four years ago, accusing it of anticompetitive behavior. Cuomo’s lawsuit mirrors many of the allegations in AMD’s case, which is scheduled to go to trial in a few months. Cuomo said Intel’s 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 didn’t play along. Among other things, he said, Intel would threaten to end joint development ventures, and instead direct funding to a manufacturer’s competitors.

The lawsuit said the fear felt by Intel’s customers was revealed in internal e-mails, including one from an IBM Corp. executive who wondered in 2005 whether the company would risk too much by strengthening its business ties to AMD.

“Can we afford to accept the wrath of Intel?” he wrote, according to the lawsuit.

Another Dell executive worried that Intel’s chairman and CEO would wage “jihad” against the computer maker if it did more business with AMD.

AMD’s lawsuit quotes managers from Toshiba saying Intel’s financial incentives amounted to “cocaine,” and executives from Gateway complaining that Intel’s threats of retaliation for working with AMD beat them “into guacamole.”

Intel denies that it improperly pressured Dell or any other company.

“We disagree with the New York attorney general,” Mulloy said. “Neither consumers, who have consistently benefited form lower prices and increased innovation, nor justice, are being served by the decision to file a case now. Intel will defend itself.”

Intel, which has its headquarters in Santa Clara, Calif., owns about 80 percent of the worldwide microprocessor market, while AMD in nearby Sunnyvale essentially has the rest. Technical missteps by AMD and the company’s deep financial problems have contributed to some of its challenges, but the company claims Intel’s illegal tactics have hindered its progress as well.

Shares in Intel gained 33 cents, or 1.8 percent, to $18.69 in afternoon trading Wednesday, while AMD shares rose 10 cents, or 2.2 percent, to $4.74.

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AP Technology Writer Jordan Robertson in San Francisco contributed to this report.

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