NY AG Cuomo Files Antitrust Lawsuit Against Intel
Posted on November 4, 2009 |
New York Attorney General Andrew Cuomo, has filed an antitrust lawsuit against the computer chip manufacturing giant Intel, accusing the company of engaging in a "systematic worldwide campaign of illegal, exclusionary conduct to maintain its monopoly power," in the market for computer chips starting in 2001.
The complaint alleges that Intel paid hundreds of millions and in some cases billions of dollars in rebates to PC manufacturers in an attempt to limit their use of chips from rival Advanced Micro Devices. When PC companies appeared to be getting too close to AMD, Intel would, the complaint says, threaten them with retribution by withholding payments they were receiving from Intel.
These payments, which Intel called "rebates," amounted to what Cuomo called "payoffs with no legitimate business purpose that Intel invented to disguise their anticompetitive nature."
"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."
The complaint paints a picture of PC makers struggling to maintain their slim profit margins, fearing that Intel's payments might dry up if they used AMD chips in their computers. The complaint accuses Intel of threatening PC makers with retaliation if they did business with AMD. During the period from 2001 to 2006, the complaint alleges, Dell sold no computers with AMD chips in exchange for billions in payments from Intel.
In cases where PC makers did business with AMD against its wishes, the complaint says that Intel made efforts to limit how much business AMD could get. In 2002, the complaint says, Intel reached an agreement with Hewlett-Packard under which HP would cap the amount of AMD-based computers it would offer at 5%, effectively giving Intel a guaranteed 95% share of HP's computer business.
The complaint also covers the server business, a space where AMD made some serious competitive gains against Intel during 2005 through 2007. In instance, the complaint alleges that IBM agreed to cancel a server that was to use AMD chips after being offered a $130 million payment from Intel and various threats. Another server that used AMD chips was marketed only on an "unbranded" basis, the complaint says.
Intel didn't immediately return a call seeking comment, but I'll update this post as soon as I hear from someone there.
The entire 87-page complaint is embedded below. There's a lot more information after the jump.
