By Mark Huffman
ConsumerAffairs.com
November 4, 2009
Intel is the
world's largest computer chip maker. The State of New York contends it got
there by violating state and federal antitrust laws.
New York Attorney General Andrew Cuomo Wednesday filed suit against Intel, accusing it of engaging in a "worldwide, systematic campaign of illegal conduct" -- revealed in e-mails -- in order to maintain its monopoly power and prices in the market for microprocessors.
Intel has faced similar suits in Europe and Asia and paid fines totaling $1.45 billion to the European Commission.
The Cuomo suit focuses on recent exclusive agreements from large computer makers in which they agreed to use Intel's microprocessors in exchange for payments totaling billions of dollars. The complaint alleges that Intel also threatened to and did in fact punish computer makers that they perceived to be working too closely with Intel's competitors. The suit claims the retaliatory threats included cutting off payments the computer maker was 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," said Cuomo. "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 said Intel paid hundreds of millions of dollars annually -- and in some years billions of dollars -- in so-called "rebates" to individual computer makers. He claims these rebates were actually just payoffs with no legitimate business purpose that Intel invented to disguise their anticompetitive nature. He says Intel also attempted to erase the most obvious traces of its anticompetitive scheme by eliminating crucial but flagrantly objectionable provisions from written agreements or by camouflaging language about illegal guaranteed market shares with terms like "volume targets."
The payments for exclusivity that Intel provided could make the difference between profit and loss for a computer maker or a segment of its business, Cuomo said. Sometimes, the payments from Intel exceeded a company's reported quarterly net income.
The suit, which was filed today 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.
