Intel faces bribery allegation in US court

New York's attorney-general on Wednesday alleged Intel (NASDAQ: INTC - news) , the world's biggest chipmaker, had used "bribery and coercion" to maintain its dominant market position after an investigation into the Silicon Valley company lasting nearly two years.

Intel is already under investigation by the Federal Trade Commission and has been censured by the FTC's counterparts in Europe, Japan and Korea over similar practices.

But Andrew Cuomo's action, filed in a federal court, is the most detailed and strongly worded to date.

"Rather than compete fairly, Intel used bribery and coercion to maintain a stranglehold on the market," the attorney-general alleged in a statement.

"Intel's actions not only unfairly restricted potential competitors, but also hurt average consumers who were robbed of better products and lower prices. These illegal tactics must stop and competition must be restored to this vital marketplace."

Mr Cuomo's suit seeks to bar further anticompetitive acts, restore lost competition, collect penalties and recover damages he says were suffered by New York and consumers.

The lawsuit alleges that Intel paid billions of dollars to PC makers for their exclusive use of its microprocessors, including $2bn in "rebates" to Dell (NASDAQ: DELL - news) in 2006. It says Intel also threatened and punished PC makers that worked too closely with its competitor Advanced Micro Devices (NYSE: AMD - news) .

It is alleged that retaliatory threats included cutting off payments in the form of rebates to PC makers, directly funding a competitor and ending joint development ventures.

New York served a wide-ranging subpoena in January last year seeking documents and information on Intel's potentially monopolistic practices.

One internal Dell email unearthed says Intel was "prepared for jihad if Dell joins the AMD exodus".

"We [will] get ZERO [rebates] for at least one quarter while Intel 'investigates the details' - there's no legal/moral/threatening means for us to apply and avoid this."

Intel appealed in September against a record E1 (017940.KS - news) .1bn ($1.6bn) fine imposed by the European Commission for abusing its dominant market position. The South Korean FTC has also fined the chipmaker.

The attorney-general's case is similar to a lawsuit brought in Delaware in 2005 by AMD, which is set to go to trial next March. Intel is also facing more than 80 class-action lawsuits in the US.

"We disagree with the New York attorney-general," Intel said in a statement.

"Neither consumers, who have consistently benefited from lower prices and increased innovation, nor justice are being served by the decision to file a case now. Intel will defend itself."