NY's Cuomo Files Antitrust Suit Against Intel

On Wednesday, Cuomo filed an antitrust suit against Intel. In it, he said that Intel used "rebates" given to manufacturers of personal computers as a way to ensure that OEMs would use Intel CPUs and shy away from chips from rival AMD.

The lawsuit (full text here) indicates that the "rebates" Intel used as incentive for OEMs to use its CPUs, motherboards, and GPUs, were in fact bribery, plain and simple. New York State Attorney General Andrew Cuomo said that these "rebates" were actually “payoffs with no legitimate business purpose that Intel invented to disguise their anticompetitive nature.”

In fact, Cuomo added, in a statement, “Rather than compete fairly, Intel used bribery and coercion to maintain a stranglehold on the market. 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.”

While Intel earlier lost judgments in both Europe and Asia, it has vowed to fight this new battle, as well. A company spokesman said that emails used by Cuomo as evidence were taken out of context.

One such out-of-context email was cited by Cuomo. It was an internal Dell e-mail in February 2004 about possibly ending its exclusive relationship with Intel. According to the email, Intel CEO Paul Otellini and then-chairman Craig Barrett, the message says, “are prepared for jihad if Dell joins the AMD exodus.” The e-mail added that the company would get zero "rebates" for at least a quarter.

In fact, it's clear that OEMs are complicit as well. An April of 2004 email from Dell shows a Dell executive asking Intel for an additional "rebate" of $100 million. Without such an additional payment, Dell would "readjust their margin guidance downward."

Dell wasn't the only large OEM involved. In another internal e-mail cited by Cuomo, an HP executive said in June 2004, after HP defied Intel and launched an AMD-based product, that Intel planned “to ‘punish’ HP.”

These same arguments had been made by AMD before and successfully, in Europe and Asia. In May, EU regulators fined Intel a record 1.06 billion-euro ($1.57 billion) for antitrust. This followed an eight-year investigation. The antitrust fine dwarfed the find given to Microsoft in 2004, which was a mere 497 million-euros.

Intel has appealed the EU decision. Additionally, Intel was fined about $25 million in 2008 by South Korea’s antitrust regulator for similar reasons cited by Cuomo. In other words, the crime was allegedly offering discounts to prevent customers from going to AMD.

Intel's stock wasn't affected by the news. Intel rose 23 cents to $18.59 at closing in Nasdaq Stock Market trading. AMD gained 5 cents to $4.69 in New York Stock Exchange composite trading.