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New York sues Intel over bullying, bribes

New York's attorney general filed a suit Wednesday against Intel for allegedly forcing or paying kickbacks to computer manufacturers to use their chips over those of rivals.

The suit was filed in the U.S. District Court of Delaware, and comes amid increased scrutiny over the Santa Clara, Calif.-based company's business practices.

New York Attorney General Andrew Cuomo claims Intel got computer makers to a carry its chips in exchange for billions of dollars of payments masked as "rebates.” The company also allegedly threatened to punish manufacturers that worked with Intel’s competitors like AMD, Cuomo said.

“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.”

Cuomo said Dell has taken $2 billion in "rebates" in 2006 from Intel to put the company's chips in its computers.

Ed Black, president of the Computer & Communications Industry Association, said that Cuomo's 83-page suit outlined new evidence involving the rebates.

"Cuomo has released additional evidence today that involves emails from the highest executives at Intel. The internal emails illustrate that contrary to Intel’s assertions, the microchip manufacturer knew that its actions potentially violated the law. Intel certainly had other clues more recently including the findings against them by antitrust officials in Japan, Korea and the EU," Black said in a statement.

"The quicker Intel owns up to its actions the quicker it, and the entire computer industry, can move on."

The company is fighting mulitple regulatory and legal battles over its practices in the global semiconductor market. Last May, the European Union's competition regulators fined Intel a record $1.57 billion following an eight-year investigation into anticompetitive practices over how it bullied or bribed its computer customers. The European regulators ordered Intel to stop giving unlawful discounts to computer makers that buy all or almost all their chips from Intel.

Intel has appealed the E.U. decision. In a dinner with reporters in Washington D.C. earlier this month, Intel's Executive Vice President, Sean Maloney, stood by the company's practices, rejecting allegations of wrongdoing. Maloney said he "took personally" the decision by E.U. regulators and scrutiny by the Federal Trade Commission. He said the European regulators didn't fully evaluate evidence in its investigation. The FTC has been investigating Intel since 2008, but hasn't launched an official proceeding over those allegations of anticompetitive practices.

Intel will fight Cuomo’s suit, spokesman Chuck Mulloy said Wednesday. E-mails cited by the attorney general as evidence were “taken out of context,” Mulloy said.

“Neither consumers who have consistently benefited from lower prices and innovation nor justice are being served by the decision to file a case now,” Mulloy said. “The market is competitive, the market works, prices are falling.”

Advanced Micro Devices Inc. originally filed the antitrust complaint to the EU. AMD, based in Sunnyvale, California, sued Intel in Delaware in 2005 alleging it controls the market for microprocessors, in part by providing discounts to customers that avoid AMD’s products.

Intel had an 81.5 percent share of the market for personal computer processors at the end of the third quarter, according to Mercury Research, based in Cave Creek, Ariz. AMD had 17.8 percent and Taiwan’s Via Technologies Inc. had the remaining less than 1 percent.

Story with contributions from Bloomberg and the Associated Press

By Cecilia Kang  |  November 4, 2009; 2:45 PM ET
Categories:  Antitrust , FTC  
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