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The world's largest microchip maker, Intel, was sued by New York's attorney general for using bullying, bribery and coercion to protect its dominant market position in a lawsuit that followed a record fine for anti-competitive behaviour levied on the company by the European Commission.

After a 20-month investigation, attorney general Andrew Cuomo accused Intel of striking deals in which computer makers such as Dell, Hewlett-Packard and IBM agreed to choose its microprocessors over those of competitors in return for billions of kickbacks disguised as "rebates".

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said by Rik Myslewski :

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The exceptionally detailed 83-page complaint (PDF) alleges that Intel "engaged in a systematic worldwide campaign of illegal, exclusionary conduct to maintain its monopoly power and prices in the market for x86 microprocessors."

In a statement, Cuomo writes that "Rather than compete fairly, Intel used bribery and coercion to maintain a stranglehold on the market. 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."

The suit includes language favorable to Intel's prime competitor, AMD. "Starting in 2001, the threat from competition became salient at Intel," the complaint reads. "Intel’s biggest CPU competitor, Advanced Micro Devices, Inc. ("AMD"), had begun developing x86 chips that not only competed with Intel's offerings, but were in many ways more desirable."

In response to that competition, the suit alleges, Intel began an "illegal campaign" to choke off AMD's distribution channels. In that effort, the suit reads, "Intel paid hundreds of millions – in some cases billions – of dollars in 'rebates' [that] bore no genuine relationship to pro-competitive, volume-based discounts or reasonable efforts to meet specific competitive offers."

In addition, according to the filing, Intel "threatened OEMs with retaliation if they persisted in dealing with AMD." As a result, and in exchange for "billions of dollars in rebate payments and other benefits," the suit notes that Dell, for example, agreed not to sell any AMD products from 2001 to 2006.

Among other charges, the suit alleges that Intel in 2002 reached an agreement with HP (which it subsequently extended to 2004) that "capped HP’s sales of AMD-based business desktop PCs" to a maximum of 5 per cent of that line - which guaranteed that Intel would enjoy the remaining 95 per cent.

Multiple emails cited in the filing indicate that Intel was aware that its actions could be used to implicate it in anti-competitive behavior. One email from "an Intel executive" to Acer, for example, describes an internal Intel electronic record-keeping tool as "a very sensitive and important document which can come under anti-trust scrutiny. Please avoid using strong language like the ones below: a. 'we need kick [sic] them [AMD] out of the major ... companies.' b. ‘maintain the [market segment share] and beat AMD out of the major ... accounts.'"

The lawsuit is just the latest in Intel's legal woes. Having recently been fined €1.06bn ($1.5bn) by the EU for similar - if not identical - anti-competitive practices, the company is reportedly facing a formal complaint by the US Federal Trade Commission in "a matter of weeks or a matter of months," according to sources cited by Reuters.

Intel did not immediately respond to our request for comment.

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