Oregon Public Broadcasting

New York's attorney general filed an antitrust lawsuit Wednesday against Intel -- following the lead of other regulators in Europe and Asia.

Prosecutors claim Intel did everything from bribe companies to threaten them to make sure they used Intel chips instead of chips made by another company.

Kristian Foden-Vencil reports.

While Intel is based in California, it's Oregon's largest corporate employer and is responsible for dozens of successful spin-off businesses here.

In a nutshell, the lawsuit charges that Intel illegally abused its dominant position in the chip market to stop its main rival, AMD, from securing more business.

In a conference call recorded  Wednesday by the New York public radio station WNYC, the Attorney General there, Andrew Cuomo, says he's not trying to stop the company from competing.

Andrew Cuomo: "But Intel has instead used illegal threats and coercion by bullying to preserve its strangle hold on the market."

Cuomo says between 2001 and 2006, many computer makers were dependent upon Intel for the majority of their chips -- and Intel used that fact to control the market.

Andrew Cuomo: "In Intel's market there were laws of supply and demand, instead it was the law of 'my way or the highway. And when Intel felt a computer maker was working too closely with another company, it would rule with an iron fist. threatening to end joint deals, cut back payments and other illegal tactics to force them into submission.'"

For example, prosecutors say Intel paid IBM $130 million to delay the release of a new server that used AMD chips. At the same time, prosecutors say, Intel threatened to stall joint projects if IBM didn't comply.

Cuomo says such actions harmed competitors; limited technological innovation; and hurt consumers. And that's why he filed the suit.

The lead investigator, Eric Corngold, says his staff sifted through tens of millions of documents and took sworn testimony from dozens of witnesses. He says they found Intel gave computer makers billions of dollars to get them to use Intel chips.

Eric Corngold: "For example in 2006, Intel paid Dell almost $2 billion. And in two quarters of that year, these payments exceeded Dell's entire reported net income."

Corngold says the the alleged scheme was striking because of both its breadth and extent. It was not, he says, a couple of isolated transactions — the suit alleges threats and bribes were an integral aspect of the company's strategy and it came from the top.

Eric Corngold: "This isn't a story of a few rogue employees going to far. Indeed our complaint has e-mails back and forth from Intel's CEO orchestrating this scheme."

Across the country in California, Intel spokesman Chuck Mulloy says the company didn't do anything illegal. All it did he says, was lower prices to win business.

Chuck Mulloy: "We competed with AMD. When AMD offered a price, we offered a better product at a better price. That's all this is about. Our products were sold above cost and consisted with U.S. laws."

Intel isn't alone in its consternation at the suit.

Ryan Radia is with a Washington D.C. free-market think-tank called Competitive Enterprise Institute, which gets some of its funding from corporate entities.

Radia says Intel is being singled out because it its chips go into 80 percent of PCs.

The government says that makes it a monopoly and therefore unable to use business practices that are common in busier marketplaces -- like discounts

But Radia says the market tells a different story.

Ryan Radia: "Every year, processors are getting much faster and the cost of processors relative to their performance is declining. So, by objective measures this is a market that's performing spectacularly."

The research and development that makes those improvements in Intel's chips is based here in Oregon.
Intel has about 15,000 employees locally, mostly in Washington County.

Today's suit is far from the first time the company has faced antitrust charges.

In 1993, the Federal Trade Commission dropped a two-year investigation for lack evidence. And in 1995, Intel settled a number of antitrust cases.

But pressure has been growing and this spring, the European Commission fined the company a record one-and-a-half billion dollars. The  company is appealing that fine.

Intel stock climbed about one percent on Wednesday.