November 21, 2018

New York AG Files Antitrust Suit Against Intel

Yesterday, New York’s state Attorney General filed what could turn out to be a major antitrust suit against Intel. The suit accuses Intel of taking illegal steps to exclude a competitor, AMD, from the market.

All we have so far is the NYAG’s complaint, which tells one side of the case. Intel will have ample opportunity to respond, and the NYAG will ultimately have the burden of backing up its allegations with proof — so caution is in order at this point. Still, the complaint lays out the shape of the NYAG’s case.

The case concerns the market for x86-compatible microprocessors, which are the “brains” of most personal computers. Intel dominates this market but a rival company, AMD, has long been trying to build market share. The complaint offers a long narrative of Intel’s (and AMD’s) relationships with major PC makers (“OEMs”, in the jargon) such as Dell, HP, and IBM — the customers who buy x86 processors from Intel and AMD.

The crux of the case is the allegation that Intel paid OEMs to not buy from AMD. This is reminiscent of one aspect of the big Microsoft antitrust case of 1998, in which one of the DOJ’s claims was that Microsoft had paid people not to do business with Netscape.

I’ll leave it to the experts to debate the economic niceties, but as I understand it there is a distinction between paying someone to buy more of your product (e.g. giving a volume discount) as opposed to paying someone to buy less of your rival’s product. The former is generally fine, but if you have monopoly power the latter is suspect.

As the NYAG tells it, Intel tried to pretend the payments were for something else, but the participants knew what was really going on: that the payments would stop if an OEM started buying more from AMD. The evidence on this point could turn out to be important. Does the NYAG have “smoking gun” emails in which Intel made this explicit? Does the evidence show that OEMs understood the arrangement as the NYAG claims? I assume there’s a huge trove of email evidence that both sides will be digesting.

It will be interesting to watch this case develop. Thanks to tools like RECAP, many of the case documents will be available to the public. Stay tuned for more improvements to RECAP that will provide even better access.

Comments

  1. Anonymous says:

    Is there a reason this is coming out of the NY, and not, say, California?

    • I don’t know why this came from New York. In principle any state’s Attorney General could have done it, but in practice only the larger states would have an AG office large enough to pull it off.

      As to why it didn’t come from California, that might have something to do with Intel’s presence in California.

    • Also, the suit involves some claims under state law. Perhaps the AG gets some advantage from New York law which would not be available under another state’s law.

  2. Another Kevin says:

    Might it also have something to do with AMD’s presence in New York?

    http://www.timesunion.com/business/amd/

  3. Oft misunderstood point…the Sherman Act doesn’t prohibit monopolies, rather, it prohibits the use of monopoly power to exclude competitors from the market. AFAIK, Intel can set prices as low as it chooses on its own products, but if it takes explicit action to keep AMD out (e.g. by paying vendors not to buy AMD’s products), this would be construed as abuse of monopoly power. Not sure why they’re trying the case in NY, though, as it seems like a federal matter.

  4. At a first glance it seems that the underlying facts are in part the same as in the European competition action against Intel: http://ec.europa.eu/competition/antitrust/cases/index/by_nr_75.html#i37_990
    Dell and HP are mentioned in the EC decision too; IBM seems a new one for NY.

    WTF can’t you make the CAPTCHAs work without needing cookies!