Intel's financial incentives for hardware makers

Intel's financial incentives for hardware makers "amounted to cocaine" said a Toshiba exec. Photo / AP

NEW YORK - New York's attorney general hit Intel with an antitrust lawsuit on Wednesday, claiming the company used "illegal threats and collusion" to dominate the market for computer microprocessors.

Following a similar case in Europe, Attorney General Andrew Cuomo claimed that the world's biggest computer chip maker paid billions in kickbacks to computer manufacturers and retaliated against those that did too much business with Intel's competitors.

Intel used its market prowess to "rule with an iron fist," Cuomo said.

"Rather than compete fairly, Intel used bribery and coercion to maintain a stranglehold on the market," Cuomo said in a written statement.

"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 didn't immediately return a call seeking comment. When the company was fined US$1.45 billion by the European Union over similar charges in May, Intel denied wrongdoing, saying its sales practices were legitimate.

The lawsuit, filed in federal court in Delaware, is based on practices that were revealed in internal emails obtained in an investigation that has lasted for nearly two years.

The case focuses on deals that Intel has struck with computer makers that agreed to exclusively use the company's chips. In particular, Cuomo cited Intel's practice of paying large rebates to big customers. He called it illegal and designed to squash competition.

Computer maker Dell alone was paid almost $2 billion in such rebates in 2006, the state said, in exchange for an agreement not to market products from Intel's main rival, Advanced Micro Devices,

Cuomo said Intel 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 emails, including one from an IBM executive in 2005 who wondered whether the company would risk too much by strengthening its business ties to AMD.

"Can we afford to accept the wrath of Intel?" he wrote, according to the suit. Another Dell executive worried that Intel's chairman and CEO would wage "jihad" against the company if it did more business with AMD.