New York sues Intel

NEW YORK | New York’s attorney general hit Intel Corp. with an antitrust lawsuit Wednesday, saying the company used “illegal threats and collusion” to dominate the market for computer microprocessors.

Following a similar case in Europe, Attorney General Andrew M. Cuomo said that the world’s biggest computer-chip maker paid billions of dollars in kickbacks to computer manufacturers and retaliated against those that did too much business with Intel’s competitors, namely Advanced Micro Devices Inc.

Intel used its market prowess to “rule with an iron fist,” Mr. Cuomo said.

“Rather than compete fairly, Intel used bribery and coercion to maintain a stranglehold on the market,” Mr. Cuomo said. “Intel’s actions not only unfairly restricted potential competitors, but also hurt average consumers who were robbed of better products and lower prices.”

An Intel spokesman, Chuck Mulloy, denied the charges and said the company’s sales practices were legitimate.

“We never threatened anyone,” he said.

The lawsuit, filed in U.S. District Court in Wilmington, Del., is the latest in a string targeting Intel’s practice of paying large annual rebates to big customers.

Intel has described the rebates as simple volume discounts, but some regulators have disagreed. The European Union fined the company $1.45 billion in May, a decision Intel is appealing to EU courts.

Intel’s closest competitor, AMD, sued Intel in the same court four years ago, accusing it of anti-competitive behavior. Mr. Cuomo’s lawsuit mirrors many of the allegations in AMD’s case, which is scheduled to go to trial in a few months. Mr. Cuomo said Intel’s rebates were illegally designed to squash competition.

Computer-maker Dell Inc. alone was paid almost $2 billion in such rebates in 2006, the state said, in exchange for an agreement not to market products from AMD.

Mr. Cuomo said Intel also resorted to “bullying” customers that didn’t play along. Among other things, he said, Intel would threaten to end joint development ventures, and instead direct funding to a manufacturer’s competitors.

The lawsuit said the fear felt by Intel’s customers was revealed in internal e-mails, including one from an IBM Corp. executive who wondered in 2005 whether the company would risk too much by strengthening its business ties to AMD.

AMD’s lawsuit quotes managers from Toshiba saying Intel’s financial incentives amounted to “cocaine,” and executives from Gateway complaining that Intel’s threats of retaliation for working with AMD beat them “into guacamole.”