N.Y. files antitrust lawsuit against Intel

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By Tomoeh Murakami Tse and Cecilia Kang
Washington Post Staff Writer
Thursday, November 5, 2009

NEW YORK -- New York Attorney General Andrew M. Cuomo filed an antitrust suit against Intel on Wednesday, accusing the world's largest chipmaker of illegally threatening computer makers and paying them billions of dollars in kickbacks to stop using chips made by rivals.

The lawsuit comes amid increased scrutiny of the company's business practices and adds to a growing chorus of complaints by overseas regulators who have accused the chipmaker of anti-competitive behavior.

Intel has repeatedly denied wrongdoing, and a company spokesman did so again Wednesday. "We disagree with the New York attorney general," Chuck Mulloy said. "Neither consumers who have consistently benefited from lower prices and increased innovation nor justice are being served by the decision to file a case now. Intel will defend itself."

Cuomo's suit, filed in the U.S. District Court of Delaware, claims that Intel violated state and federal antitrust laws by "engaging in a worldwide, systematic campaign of illegal conduct" that involved threatening and bribing executives at firms with such household names as Hewlett-Packard, Dell and IBM.

According to the lawsuit, Intel persuaded computer makers to use its chips in exchange for billions of dollars of payments masked as "rebates." The company also threatened to retaliate against manufacturers that worked with Intel's competitors, in a particular Advanced Micro Devices.

For example, Cuomo said, Intel paid nearly $2 billion in 2006 to Dell, which agreed to refrain from marketing AMD products. Intel also paid IBM $130 million not to launch a product using AMD chips and threatened to derail a joint development project with Hewlett-Packard if the computer maker promoted AMD products, Cuomo said.

A history of scrutiny

"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."

As part of the lawsuit, Cuomo presented internal e-mails between Intel executives as well as between Intel executives and those at computer makers.

According to Cuomo, for example, Intel chief executive Paul S. Otellini wrote a 2005 e-mail to Dell chief executive Michael S. Dell, who had complained that his company's business performance was suffering. Otellini reminded him that Intel had paid more than $1 billion to Dell. " This was judged by your team to be more than sufficient to compensate for the competitive issues," Otellini allegedly wrote.

Hewlett Packard, Dell and IBM either declined to comment or did not return phone calls and e-mail.

While numerous foreign regulators have filed lawsuits against Intel, which is based in Santa Clara, Calif., Cuomo's is the first formal antitrust action against Intel by U.S. regulators in more than a decade. In 1998, the Federal Trade Commission filed an administrative complaint, which was later settled.

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