New York AG Sues Intel: Sounds Like Politics To Me

January 11, 2008

Like his predecessor (and now New York Governor) Eliot Spitzer in the New York State Attorney General's office, current New York Attorney General Andrew Cuomo is widely believed to have political aspirations beyond his current post.

Noting Cuomo's lineage as a son of former New York Governor Mario Cuomo, that's what some of the current AG's detractors- and even some of his fans- say.

And like now-Gov. Spitzer, Andrew Cuomo is taking action against high-profile corporations whose actions he deems questionable. Even if federal laws cover these same actions.

The lastest such move is exemplified by a subpoena Cuomo's office has served on California-based Intel.

Cuomo's office has just issued a press release explaining the subpoena's request. Follow along to read it.

Attorney General Andrew M. Cuomo today served a wide-ranging subpoena seeking documents and information on Intel Corporation, the world’s largest maker of computer microprocessors. Cuomo is investigating whether Intel violated state and federal antitrust laws by coercing customers to exclude its main rival, Advanced Micro Devices (AMD), from the worldwide market for x86 computer processing units (CPU).
“After careful preliminary review, we have determined that questions raised about Intel's potential anticompetitive conduct warrant a full and factual investigation,” said Attorney General Cuomo. “Protecting fair and open competition in the microprocessor market is critical to New York, the United States, and the world. Businesses and consumers everywhere should have the ability to easily choose the best products at the best price and only fair competition can guarantee it. Monopolistic practices are a serious concern particularly for New Yorkers who are navigating an information-intensive economy.”
The subpoena served today on Intel seeks documents and information concerning Intel’s pricing practices and possible attempt to exclude competitors through its market domination. The information sought is relevant to whether Intel, among other things:

Penalized its customers, primarily computer manufacturers, for purchasing x86 computer processing units (CPU) from competitors;
Improperly paid customers for exclusivity;
Illegally cut off competitors from distribution channels.

Modern x86 CPUs are currently the industry-wide standard for a majority of desktops, laptops, notebooks, servers, and workstations. The x86 market accounts for over $30 billion in annual worldwide sales, with Intel retaining the lion's share of the market, estimated at 90% by revenue and 80% by volume.
“Our investigation is focused on determining whether Intel has improperly used monopoly power to exclude competitors or stifle innovation,” said Cuomo. “We will also look at whether Intel abused its power to remove competitive threats or harm competition in violation of New York and federal antitrust laws.”
Similar antitrust allegations have been examined by authorities in Europe and Asia and resulted in formal actions, including a cease and desist order, against Intel. In July 2007, the European Commission reached and the Korean Fair Trade Commission reached preliminary conclusions that Intel violated competition law. In 2005, the Japanese Fair Trade Commission concluded that Intel violated its competition laws and Intel agreed to cease and desist.

Well, I am not a lawyer, but I do have two questions:

Why is Intel guilty of anything more than being a sharp competitor, and coming to the chips came first, with the most?

Even if Intel's competitive strategies are suspect, doesn't this sound like something the Feds ought to tackle? Why would the state of New York be deemed to have authority to act here?