Intel charged in antitrust lawsuit
Lawsuit filed in federal court alleges Intel used bribery and coercion to maintain its dominance in the microprocessor market
Jim Carbone -- Purchasing, 11/4/2009 3:47:23 PM
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New York Attorney General Andrew Cuomo has filed a federal antitrust lawsuit against Intel, charging the company paid computer makers billions of dollars to use Intel microprocessors rather than processors from rival Advanced Micro Devices (AMD).
Cuomo says Intel used “bribery and coercion to maintain its stranglehold” in the microprocessor market. The world’s largest chipmaker violated state and federal anti-monopoly laws and engaged in a systematic campaign of illegal conduct to maintain its market position, according to the lawsuit.
An Intel spokesperson denied the charges and said it would fight the lawsuit.
Analysts say it’s unclear if the suit will affect the market.
The attorney general charges that Intel extracted agreements from large computer makers in which they agreed to use Intel’s microprocessors in exchange for payments totaling billions of dollars.
Intel called the payments “rebates,” but they were actually just payoffs with no legitimate business purpose, says the attorney general’s office.
The suit charges Intel also threatened computer makers if they worked closely with the chipmaker’s competitors. The alleged threats included cutting off payments the computer makers were receiving from Intel, directly funding a computer maker’s competitors, and ending joint development ventures.
“Rather than compete fairly, Intel used bribery and coercion to maintain a stranglehold on the market,” Cuomo says in a statement. Intel’s actions unfairly restricted potential competitors, but also hurt “average consumers who were robbed of better products and lower prices,” he says.
The suit alleges that in 2006 Intel paid Dell almost $2 billion in “rebates.” From 2001 to 2006, Intel gave Dell a privileged position over other computer makers in return for Dell’s agreement not to market any products from AMD, Intel’s main competitor. Intel and Dell collaborated to market microprocessors and servers at prices below cost, according to New York attorney general.
Intel threatened Hewlett-Packard (HP) that it would derail development of a server technology on which HP’s future business depended if HP promoted products from AMD, according to the lawsuit. The attorney general charges that 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, the lawsuit says, Intel and HP entered into a broader agreement under which HP would be paid $925 million to increase Intel’s shares of HP’s sales at AMD’s expense.
Additionally, the suit says Intel paid IBM $130 million not to launch an AMD-based server product, and threatened to pull funding for joint projects that benefited IBM if IBM marketed AMD-based server products
The suit, which was filed 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.
“I don’t know if this will change the market dynamics all that much,” says Rob Lineback, senior market research analyst for IC Insights, a research firm in Scottsdale, Ariz.. “It’s one more legal log on the fire for Intel.”
He notes that Intel has faced a series of legal challenges, including a $1.45 billion fine by the European Commission for antitrust violations, which the company is appealing. It faces similar charges in Asia and the Federal Trade Commission has been investigating Intel since 2008.
“I doubt one more lawsuit will make a big difference long-term for Intel,” says Lineback. “It is an ongoing problem that Intel has been facing. However, it does mean that Intel will have to fork over more money to lawyers,” he says.
See also: Intel to cooperate with FTC antitrust probe
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