New York AG files antitrust charges against Intel; alleges bribery, coercion

New York AG files antitrust charges against Intel; alleges bribery, coercion

Summary: The New York Attorney General's office has filed federal antitrust charges against Intel Corp., alleging bribery and coercion against the PC makers.

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The New York Attorney General's office today accused chip maker Intel of engaging in "a worldwide, systematic campaign of illegal conduct," including paying kickbacks and threatening computer makers, and filed federal antitrust charges against it. (PDF of Complaint)

In a statement, New York Attorney General Andrew Cuomo said that e-mails revealed that Intel has scored  exclusive agreements with computer makers to use its microprocessors by resorting to "rebates" and threats, such as cutting off payments, funding a competitor or ending joint development ventures. In a press release, Cuomo said:

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.

Intel spokesman Chuck Mulloy told the Wall Street Journal that the company will defend itself against the charges and that "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."

Cuomo's office said the company also tried to erase traces of its practices 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 AG's office noted specific instances of the illegal practices involving Intel and Dell, HP and IBM. Among the allegations:

  • From 2001 to 2006, Intel granted Dell a privileged position vis-à-vis other computer makers in return for Dell’s agreement not to market any products from Advanced Micro Devices, Intel’s major competitor
  • Intel threatened HP that it would derail development of a server technology on which HP’s future business depended if HP promoted products from AMD
  • Intel paid HP hundreds of millions of dollars in rebates in return for HP’s agreement to cap HP’s sales of AMD-based products at 5% of its business desktop PCs
  • Intel paid IBM $130 million not to launch an AMD-based server product
  • Intel threatened to pull funding for joint projects that benefited IBM if IBM marketed AMD-based server products

The AG's office also offered examples of instances where PC makers agreed to go along with Intel's practices, specifically a 2006 deal between HP and Intel that involved payment of $925 million to HP to increase Intel's shares of HP's sales at AMD's expense and a collaboration between Intel and Dell to market microprocessors and servers at prices below cost to "deprive AMD of strategically important competitive successes."

However, the AG positions the PC makers as victims here, not collaborators. For example, the AG's office offers these examples, unveiled as part of its 20-month investigation:

  • Internal e-mail from IBM executive in January 2005: “I understand the point about the accounts wanting a full AMD portfolio. The question is, can we afford to accept the wrath of Intel…?”
  • Internal e-mail from HP executive in June 2004 after HP defied Intel and launched an AMD product: “Intel has told us that HP’s announcement on Opteron [AMD’s server chip] has cost them several $B [Billions] and they plan to ‘punish’ HP for doing this.”
  • Internal Dell e-mail in February 2004 regarding the possibility of Dell ending its exclusive relationship with Intel: “PSO/CRB [Intel CEO Paul Ottelini and Intel Chairman Craig Barrett] are prepared for jihad if Dell joins the AMD exodus.
  • Internal e-mail from Intel executive in April 2006: “Let’s talk more on the phone as it’s so difficult for me to write or explain without considering anti-trust issue.”

Topics: Hewlett-Packard, Collaboration, Dell, Enterprise Software, Hardware, Intel, Processors, Security, Servers

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147 comments
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  • Great to see some justice against Inhell

    I can hardly wait to see the M$ investigated again for antitrust violations.
    Linux Geek
    • What does MS have anything to do with this?

      How MS related to this?
      mathcreative
      • Inhell just applied formulas from M$ book of crimes

        and also colaborated with M$ to stiffle competition.
        Linux Geek
        • Proof

          Well, this is pretty clearly a troll operation BUT ...

          If Microsoft really paid manufacturers if they never sold Apple equipment ... please provide references.

          If Microsoft paid software companies to keep AMi Pro and Word Perfect for Windows off of their SKU list ... please provide references.

          == John ==
          jgwinner
          • there is no proof of that sort

            The two companies simply share similar traits in that both have dominated their markets and both have used undue leverage to up their own share and do down others.

            The most recent has been the fight over Office document dormats. Open Office and ECMA standards which not even MS follow; and OO importers which (for some starnage reason) fail to fully implement the OO standards and omit OO features (like formule when converting calc to excel!)

            Let's travel back in time. When Internet Explorer first came out there were fights with Netscape (which originally had a very large market share) - resulting in court cases and accusations of MS exploiting their position as OS supplier. Those arguments (not associated with Netscape) continue to this day.

            Once upon a day Novell provided servers to many institutions. When MS wrote windows 2, windows 3 (particularly windows 3) they implement Novell server drivers so badly as to make it pretty much impossible to connect a windows PC to a Novell server. There were stories at the time of MS programmers deliberatly using code that didn;t work. Novell had to write their own Windows drivers from Scratch.

            And there certainly have been accusations that MS have contrancted with PC suppliers so they would only sell Windows pre-installed, to Linux's disadvantage. That one may or may not have meant money passing hands. Thestories imply that windows came cheap if the company ditched other OS suppliers.

            Any connection between MS and Intel. No, of course not. Simply a case of convergent evolution.
            dgrainge
          • Your stuff's a little stale...

            Dude, really?? You're dredging up examples from 15 years ago? No doubt, Microsoft used their heft to wrest what they could from competitors. But the successful antitrust actions here in the states and in the EU have got MS toeing the line pretty well. Sure, they'll do whatever they can get away with, but it's nowhere nearly as egregious now as it used to be.
            Ryk
          • Ami Pro...

            Samna - maker of Ami Pro - got bought out by IBM (Lotus) and the product morphed into a component of Symphony.

            Wolfie2K3
        • Really

          Is that why Microsoft worked so closely with AMD to support x86-64 technology when Intel was pushing so hard on the Itanium and when AMD had great success with their Athlon 64's Intel had to make EMT64 which is basically a copy of AMD's 64bit instruction set. We all know that you hate MS but MS and AMD are good partners and MS also partners with Intel and I have yet to see any favoritism on Microsoft's part.

          In the case of Intel I have seen it first hand starting back in the K5 and K6 series processors where intel would provide sponsorship money to retail channels on the condition the put up no AMD advertisement banners or logos and put the AMD (and Cyrix at the time) based computers on the back shelf. Every intel based computer had an Intel Inside logo on the information tag and stores were not allowed to put AMD logos on the the information tags pertaining to those systems. I even had a rep want us to remove the AMD and Cyrix logos off the display units and hide any of those logos on shelf stock. I know this happened at many Best Buy's, Circuit City's and other Computer shopping stores. It was then I proudly wore my AMD pin on my name badge as a Best Buy repair tech. The worst one that happened to me personally is when an Intel Rep went out and got lunch for the 6 people on staff that day and conveniently forgot me and said "Oh I didn't know you were here" even though I spoke to them earlier that morning.
          bobiroc
          • yes, really

            M$ delayed the release of Windoze for 64 bits because there were only AMD boxes capable of running it.
            As soon as Inhell started shiping their own extended 64 bit chips, M$ released the code to manufacturing.
            Linux Geek
          • Again Proof

            When AMD released it's x86-64 instruction set AMD and Microsoft worked together to make XP-64 work with that instruction set because originally XP-64 was compiled to work on the proprietary Itanium Instruction Set so it may have taken a little time to get the re-compile right and while XP-64 for x86-64 was not publicly released as soon as the AMD 64 processors where it did come out within a reasonable amount of time. In fact Microsoft told intel that if they wanted to make a x86-64 processor they had to use AMD's instruction set so that they did not have to recompile the code for XP-64 yet again.
            bobiroc
          • Get real.

            The so-called Linux Geek is at it again. Seeing Microsoft behind every problem, including his present condition of paranoia. MS has nothing to do with Intel and AMD problems. Get help. According to Linus Torvalds "I think the Microsoft hatred is a disease". I believe he is right.
            Abeokuta01
          • RE: 64 bit Windows

            Yes, I'm sure that decision was collusion as opposed to Microsoft figuring it would be a bad idea to release an OS that could only run on a fraction of the world's processors. Clearly this is proof of the great conspiracy. I wouldn't release a car that only ran on 5% of the country's roads and I wouldn't release a piece of software that only ran properly on 5% of the world's PCs. That's just good business sense. Look, I'm sure that, like all big businesses, Microsoft and Intel have done some sketchy things, but you're now just spewing frustrations, not citing illegal activities.
            branchman67
        • LOL!

          A fool untill the end, Linux Geek?

          You are the perfect court jester for these boards, that much is certain.

          I can not say that about your "information", but your fantasies are quite the amussing read. :)
          GuidingLight
        • Great...

          Once aggain Linux Geek proves that he has zelous tendencies that pushes him to make a wierd relation between hell, Intel, MS and the Devil....

          He really needs to get some medication for his mental problem... or his agressive obsession aggaint Intel and MS(and his inability to use the letter 'S').
          Ceridan
        • Funny

          What I find funny is that AMD for years would steal the Intel Chips and copy them.

          Goes to show that they are still stealing from Intel
          rparker009
          • You need a history lesson

            For years, Intel licensed the x86 designs to AMD.

            When Intel refused to license the Pentium design, AMD created their own. That was, in my opinion, a big mistake by Intel - as AMD's design was arguably better.

            http://lmgtfy.com/?q=intel+amd+license

            Spikey_Mike
      • Nothing..he is a troll

        and will interject his MS hatred comments into any forum, blog, or article he can. The article could be about baking cupcakes and he would find a way to bash Microsoft.
        bobiroc
    • On the contrary ...

      NY AG was upset b/c Intel didn't bribe him enough so this is the outcome.
      LBiege
    • Why do you dislike Intel?

      I hate Microsoft, but what makes intel chips so bad? I can't wait for MS to get investigated again either, but what horrific product has intel made? THis is an actual question, so no flames please.
      Subsentient
      • I do not dislike Intels product.

        I do not dislike Intels product but I can dislike anti-competitive practices. I have used both Intel and AMD processors and found the cheapest 64 bit AMD does as much work as a two core Intel. So people who need productive computers could get the most productivity per dollar by using 64 bit AMD running 64 bit software.

        If Intel produces a superior product and as lesser price with great distribution and service then they should succeed. But if Intel is feeling the heat from AMD and jiggers the marketplace then we are all the losers.
        clareJ