Intel Lawsuit Explained

New York Attorney General Andrew Cuomo, has filed an antitrust lawsuit against the computer chip manufacturing giant Intel, accusing the company of engaging in a "systematic worldwide campaign of illegal, exclusionary conduct to maintain its monopoly power," in the market for computer chips starting in 2001. The complaint alleges that Intel paid hundreds of millions and in some cases billions of dollars in rebates to PC manufacturers in an attempt to limit their use of chips from rival Advanced Micro Devices. When PC companies appeared to be getting too close to AMD, Intel would, the complaint says, threaten them with retribution by withholding payments they were receiving from Intel. These payments, which Intel called "rebates," amounted to what Cuomo called "payoffs with no legitimate business purpose that Intel invented to disguise their anticompetitive nature." The complaint paints a picture of PC makers struggling to maintain their slim profit margins, fearing that Intel's payments might dry up if they used AMD chips in their computers. The complaint accuses Intel of threatening PC makers with retaliation if they did business with AMD. During the period from 2001 to 2006, the complaint alleges, Dell sold no computers with AMD chips in exchange for billions in payments from Intel. Intel used what the complaint describes as a "favorite code word" in its dealings with PC companies: That word was "alignment." If a PC company was not "aligned" then they could not expect favorable treatment from Intel, the complaint says, including the payment of rebates, pricing concessions, priority in obtaining needed parts during shortages, and marketing funds. A key part of Intel's strategy for years has been to help PC companies market their products. Under the "Intel Inside" programs, PC makers you touted their use of an Intel processor or a combination of Intel technologies in their machines, would have their advertising costs partially subsidized by Intel. This arrangement has been described by a PC company executive cited in AMD's lawsuit as "the cocaine of the industry," meaning that PC companies relied heavily upon these payments in their business plans.