NY Intel antitrust lawsuit gets mixed reviews

The microprocessor market is working for consumers, critics say

New York Attorney General Andrew Cuomo's decision to file an antitrust lawsuit against Intel doesn't make sense, with prices for microprocessors falling sharply in recent years, said some critics.

"Let's remember what abusive monopoly power is supposed to mean: reduced quantity sold, higher prices, suffering consumers," Wayne Crews, vice president of policy for the Competitive Enterprise Institute (CEI), wrote on a blog.

"They're 'suffering' all right, with a plethora of wildly popular sub-$400 netbooks, thanks to a complex and efficient marketplace in which Intel plays an important role, along with all its business partners."

Cuomo, in his lawsuit filed Wednesday, complained that Intel essentially bribed computer makers to use its microprocessor chips by paying them billions of dollars in recent years. But Crews suggested that computer makers would "revolt" if the business relationships they had with Intel weren't working.

"If the downstream partner's hardware sales suffer because of Intel, it can retaliate," he wrote. "Thus as far as abusive behavior is concerned, the market is self policing. The only thing that could prevent computer makers themselves from ganging up against Intel abuses would be the antitrust laws themselves."

CEI, a free-market think tank, blasted Cuomo's lawsuit as a "witch hunt."

The Cuomo case may depend largely on a similar lawsuit filed against Intel by competitor Advanced Micro Devices. The Cuomo lawsuit is a "duplication" of the AMD complaint filed in 2005, said Chuck Mulloy, an Intel spokesman.

A pretrial hearing in the AMD lawsuit is scheduled for mid-December, and the trial is scheduled to begin March 29. Cuomo's case could largely depend on whether AMD is successful, Mulloy said.

Intel disagrees with Cuomo's allegations, as it does with AMD's, Mulloy said.

Other groups applauded Cuomo's decision to file suit.

The New York lawsuit "details explicit evidence of Intel's harm to U.S. consumers and computer manufacturers," Tom McCoy, AMD's executive vice president for legal, corporate and public affairs, said in a statement.

"Stopping that illegal harm will serve the settled purpose of the American antitrust laws: ensuring that innovation is unconstrained and competition is free to serve consumers."

The Computer and Communications Industry Association, a trade group that presses for strong antitrust enforcement in the tech industry, called Cuomo's case "strong."

Cuomo released a group of e-mail messages that show Intel and its computer maker partners were concerned about antitrust investigations, CCIA noted.

"Cuomo has released additional evidence today that involves e-mails from the highest executives at Intel," said Ed Black, CCIA president and CEO. "The internal e-mails illustrate that contrary to Intel's assertions, the microchip manufacturer knew that its actions potentially violated the law."

Intel should recognize that its actions were illegal after a string of antitrust rulings against the company in Japan, South Korea, and Europe, Black added.

"It is time for Intel to admit its misconduct, repair the harms it has perpetrated and change its business practices," he said. "Its legal strategy is clearly not working and its broad claims of innocence are being shown to be more hollow each passing day. The quicker Intel owns up to its actions, the quicker it, and the entire computer industry, can move on."

But Ken Ferree, a senior fellow at the Progress and Freedom Foundation, a free-market think tank, suggested that a "political splash" is the only reason for Cuomo to bring the case.

"It's unfortunate that the New York attorney general has decided to interfere in a market that is actually working for consumers," he said.

"Despite all of the rhetoric and grandstanding, there is no evidence that I've seen of any harm to Intel's competitors, to competition, or to consumers. On the contrary, the microprocessor market is characterized by rapidly falling prices, increasing outputs, and improved performance."

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Grant Gross

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