Infrastructure // PC & Servers
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11/4/2009
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Intel Hit With Antitrust Suit In NY

The New York attorney general claims the chipmaker used bribery and coercion to prevent computer makers from using rival products.

New York Attorney General Andrew M. Cuomo on Wednesday filed a federal antitrust lawsuit against Intel, saying the chipmaker used "bribery and coercion" to prevent computer makers from using rival products that threatened the company's market dominance.

The suit filed in a Delaware federal court claimed that over the last several years, Intel paid billions of dollars in kickbacks under the guise of "rebates" to extract exclusive agreements from major computers makers, including Dell, Hewlett-Packard, and IBM. Retaliatory threats against computer manufacturers perceived as working too closely with Intel rivals included cutting off payments from Intel, funding a computer maker's competitors, and ending joint development ventures, according to the suit.

"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."

Intel did not respond to a request for comment in time for this writing.

Cuomo's lawsuit adds to Intel's legal woes stemming from its alleged antitrust practices. The company has faced similar lawsuits in Asia and Europe, and in May was fined $1.45 billion by the European Commission for antitrust violations. In addition, the company is under investigation by the Federal Trade Commission and faces a private antitrust lawsuit filed by its main competitor, Advanced Micro Devices. That suit is expected to go to trial next year.

According to the latest suit, Intel paid hundreds of millions of dollars annually, and in some years billions of dollars, in payoffs, and attempted to hide its anti-competitive practices through "camouflaging language" in written agreements. Sometimes the payments were enough to make the difference between profit and loss for a computer maker.

The lawsuit detailed examples of Intel practices it claims are anti-competitive.

In 2006, Intel paid Dell nearly $2 billion in "rebates," and in two quarters of that year, the payments exceeded the computer maker's reported net income. In addition, the lawsuit claims Intel and Dell worked together to market microprocessors and servers at prices below cost in order to deprive AMD of sales.

In a November 2005 e-mail from Dell chief executive Michael Dell to Intel chief executive Paul Otellini, Dell complained, "We have lost the performance leadership and it's seriously impacting our business in several areas."

Otellini's response was that Intel's products were "improving rapidly daily" and would deliver "increasingly leadership products."

"Additionally, we are transferring over $1 billion per year to Dell for meet comp efforts. This was judged by your team to be more than sufficient to compensate for the competitive issues," Otellini wrote, according to the suit.

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