New York accuses Intel of antitrust violations

Stephen Withers
Thursday, 05 November 2009 10:53

IT Industry - Strategy

Payments allegedly made to Dell, HP and IBM are cited by the AG's office, which claims that "Although Intel tried to disguise the anticompetitive nature of these payments, they bore no genuine relationship to pro-competitive, volume-based discounts or reasonable efforts to meet specific competitive offers."

These payments were being made at a time when AMD was generally regarded as having a technological lead over Intel.

The AG's filing notes that "Intel is extremely profitable; in contrast, the margins of its primary customers, the 'top tier' OEMs, tend to be thin – often in low single digits. This enables Intel to directly affect OEMs’ bottom-line quarterly profits, by favoring certain OEMs with lower prices and other subsidies, while punishing others."

"In pure dollar terms, Dell was far and away the leader in receiving Intel's largess. For example, over the four year period from February 2002 to January 2007, it received approximately $6 billion in 'rebates'."

But when Dell stepped up its use of AMD chips in 2006, its rebates from Intel fell from around $US800 million in a quarter to less than $US200 million.

The office claims to have evidence that top executives at Intel and Dell took care to keep their dealings secret, and that despite the billions of dollars involved, there was no formal documentation of the agreements.

An investigation into the matter began in January 2008, and officials claim to have emails and other documents demonstrating the illegal activity.

The Attorney General is seeking a prohibition on Intel carrying out further anticompetitive acts, the restoration of competition, damages for New York government entities and consumers, and penalties against the company.