Intel antitrust allegations mount as New York launches probe

By Suzanne Deffree, Managing Editor, News -- 1/10/2008

New York State is the latest in a growing line of governments investigating possible anticompetitive behavior by microprocessor leader Intel Corp. 

State Attorney General Andrew M. Cuomo today served a wide-ranging subpoena seeking documents and information on Intel to investigate whether the company violated state and federal antitrust laws by coercing customers to exclude its main rival, Advanced Micro Devices Inc, from the worldwide x86 CPU market.

“After careful preliminary review, we have determined that questions raised about Intel's potential anticompetitive conduct warrant a full and factual investigation,” said Cuomo in a statement. “Protecting fair and open competition in the microprocessor market is critical to New York, the United States, and the world. Monopolistic practices are a serious concern particularly for New Yorkers who are navigating an information-intensive economy.”

The subpoena served today on Intel seeks documents and information concerning the company’s pricing practices and possible attempts to exclude competitors through its market domination. New York State is examining whether Intel penalized its customers, primarily computer manufacturers, for purchasing x86 CPUs from competitors; improperly paid customers for exclusivity; and/or illegally cut off competitors from distribution channels.

Speaking with Electronic News, Intel representative Chuck Mulloy confirmed that Intel had received the subpoena and would comply. “Our position is that our business practices are lawful and that we believe the microprocessor market is a competitive market and is behaving as one would expect a competitive market to behave,” he said. “As is our normal practice, we will work very hard to comply with the requested information in the subpoena.”*

Not surprisingly, AMD is applauding the action. “New York State’s decision based on its findings to date to open a formal investigation of Intel’s anticompetitive business practices is good news for computer buyers in New York and throughout the US,” Michael Silverman, a representative for AMD, told Electronic News.*

The New York inquiry is very similar to allegations made by the European Commission (EC) in July 2007,  charging the Santa Clara, Calif.-based chipmaker with violating European Union competition laws. Intel this week responded to the EC charges in a confidential statement and is seeking an official oral hearing. The inquiry also echoes other rulings and investigations overseas: In March 2005, Japan's Fair Trade Commission ruled that Intel had violated the country's anti-monopoly laws by forcing full or partial exclusivity with five Japanese PC makers. Also, the Korean Fair Trade Commission in September 2007, sent a "statement of objections" to Intel announcing it was questioning whether Intel violated Korea's fair trade and monopoly regulation act. 

The attorney general's inquiry further mirrors a June 2005 suit brought against Intel by AMD in Delaware,  claiming antitrust business practices. Intel denied those allegations in September 2005. In September 2006, a federal judge granted Intel’s motion to dismiss a large portion of AMD's antitrust claims. However, in December 2006, a federal district court in the state ordered Intel to produce documents and other evidence bearing upon its conduct outside of U.S. borders in the ongoing case.*

Commenting on the New York probe, Cuomo continued: “Our investigation is focused on determining whether Intel has improperly used monopoly power to exclude competitors or stifle innovation. We will also look at whether Intel abused its power to remove competitive threats or harm competition in violation of New York and federal antitrust laws.”

Calls to the attorney general’s office requesting further comment on what specifically prompted this investigation were not returned by press time.

Sunnyvale, Calif.-based AMD, which along with partner IBM has a large presence in upstate New York and in 2006 was lured by almost $1 billion in incentives to build a $3.2 billion fab there, has also been issued a subpoena. Silverman said he could not comment on that.

For commentary on this story, see "Something’s fishy in the state of New York."

*Editor’s note: This story was updated at 4pm eastern to include comments from Intel and AMD, as well as information on the Delaware lawsuit.

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