Antitrust charges filed against Intel

The New York Attorney General has filed antitrust charges against chip giant Intel, claiming that the company engaged in "a worldwide, systematic campaign of illegal conduct."

The New York Attorney General has filed antitrust charges against chip giant Intel, claiming that the company engaged in "a worldwide, systematic campaign of illegal conduct."

According to New York Attorney General Andrew Cuomo, emails have come to light which suggest that Intel leveraged "rebates" and employed threats and bribery to secure deals with PC makers.

Here's what Cuomo said in a press release:

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.

The complaint filed makes very interesting, and damning, reading:

Intel has engaged in a systematic worldwide campaign of illegal, exclusionary conduct to maintain its monopoly power and prices in the market for x86 microprocessors, the “brains” of Personal Computers ("PCs").  By exacting exclusive or near-exclusive agreements from large computer makers (“Original Equipment Manufacturers” or “OEMs”) in exchange for payments totaling billions of dollars, and threatening retaliation against any company that did not heed its wishes, Intel robbed its competitors of the opportunity to challenge Intel’s dominance in key segments of the market.  This illegal behavior was highly detrimental to consumers, competition, and innovation.

Starting in 2001, the threat from competition became salient at Intel.  Intel’s biggest CPU competitor, Advanced Micro Devices, Inc. (“AMD”), had begun developing x86 chips that not only competed with Intel’s offerings, but were in many ways more desirable.  Business customers and consumers increasingly sought AMD-based computers.  OEMs began to comply. 

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Intel launched an illegal campaign to deprive AMD of distribution channels and consumers of product choice and lower prices.

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At the same time, Intel threatened OEMs with retaliation if they persisted in dealing with AMD.  These threats took a variety of forms, including funding an OEM’s competitors to directly compete against it, ending any current payments that the OEM received from Intel, and ending joint development ventures.

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At the highest levels, Intel routinely takes steps to make its displeasure felt when it feels threatened by OEM actions – even when those actions appear to be routine commercial behavior.  Intel’s customers are constantly reminded where their primary loyalty should lie.  For example, in March 2006, Intel’s CEO Paul Otellini received a courtesy “heads-up” from an HP executive that HP was sponsoring an advertisement featuring HP’s relationship with AMD and the theme of customer choice.  Otellini reacted:  “So, … why did you feel compelled to do this? It is certainly insulting to us and I do not see how it helps you…. If we are your key partner, this is nothing but a slap at us … I really don’t want to get in a pissing contest over this … But running an ad touting 10 years with amd [sic] and ‘choice’ is not the behavior of someone who wants to bring our two companies together.”

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Intel’s objective throughout was not to eliminate AMD entirely, but to crush an unprecedented threat to its monopoly power.

Full complaint here (PDF).