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New anti-competition suit filed against Intel

New York Attorney General says billions of dollars of illegal rebates made to vendors including Dell, HP and IBM

The suit alleges that billions of dollars of rebates, sometimes exceeding actual income, were paid to Dell over several years.
The suit alleges that billions of dollars of rebates, sometimes exceeding actual income, were paid to Dell over several years.

Intel is facing more allegations of anti-competitive behaviour, after a US Federal lawsuit was filed against the company yesterday.

The suit alleges that Intel used billions of dollars worth of illegal rebates, paid primarily to Dell, to keep processors from rival AMD out of PCs from major vendors.

Earlier this year Intel was fined one billion euros by the European Commission, for anti-competitive behaviour, and the company has faced investigations in Japan and Korea over similar issues. AMD also filed a suit against Intel in 2006 alleging anti-competitive behaviour.

The new suit contains many specific allegations involving rebates paid to Dell, although IBM and HP are also included in the complaint.

The suit, filed by New York Attorney General Andrew Cuomo, says that Dell received regular rebates through two programs, called "Mother of all Programs" (MOAP) and "Meet Competition Payments" (MCP) with rebates based on global percentages and lump-sum payments.

Dell also received funds from used a "bid bucket" program which encouraged Dell to make below-cost bids, with Intel subsidies, when competing against AMD-based server products.

The suit also alleges that Intel punished Dell for its decision to introduce AMD-based PCs in September 2006, having previously only produced Intel machines. The suit claims: "Intel's retaliation was massive. For February, March, and April of 2006, Intel had paid Dell approximately $800 million in rebates; in the three-month period from November 2006 through January 2007 - after it had first offered an AMD-based product - Dell received less than $200 million in rebates."

Another allegation raised is the level of rebates involved and Dell's reliance on them, with claims that rebates actually exceeded income in some quarters.

"In 2006, Dell received approximately $1.9 billion in rebates from Dell, and in two quarterly periods of that year, rebate payments exceeded reported net income. From February to April of 2006, rebates ($805 million) amounted to 104% of net income ($776 million). The following 3 months, between May and July of 2006, the proportion was even higher, 116% ($554 million of rebates and $480 million in net income)."

Intel spokesperson Chuck Mulloy said in a statement: "It is the AMD case filed 4.5 years ago. It's the same case the EU brought. There's nothing significant or new here that hasn't been discovered. Neither consumers--who have consistently benefited from lower prices and increased innovation--nor justice are being served by the decision to file this case now."

"We use both Intel and AMD chips and we do provide customer choice," Dell spokesman David Frink said Wednesday.