The State of New York has decided to file suit against Intel for anticompetitive practices following nearly two years of investigation.

The suit was brought by the state of New York and its attorney general, Andrew S. Cuomo, which named specific instances of alleged bribery and coercion in the suit. Intel allegedly used billions of dollars in rebates to influence OEMs, which Cuomo said was tantamount to bribes.

The suit caps an investigation performed the state and begun in January 2008. Intel has also been the subject of similar antitrust investigations and suits in South Korea and Japan, and by the European Union. A civil case brought by AMD is scheduled to go to trial in early 2010.

The suit asks for damages and civil penalties, as well as injunctive and other equitable relief under New York state laws. As justification, the suit claims that "Intel's illegal conduct has corroded competitive conditions in an economically vital market," the state.

"Rather than compete fairly, Intel used bribery and coercion to maintain a stranglehold on the market," Cuomo said in a written statement. "Intel's actions not only unfairly restricted potential competitors, but also hurt average consumers who were robbed of better products and lower prices."

Chuck Mulloy, a spokesman for Intel, said that he was prevented from commenting directly on the evidence presented in the suit, as it was covered in the protective order filed in AMD's suit in Delaware. Other exculpatory evidence will be revealed at trial, he said. As for the New York suit, Mulloy said it was a "one-sided interpretation of the evidence".

Intel began its anticompetitive practices in 2001, the suit found, when AMD mounted its first threats against Intel with a line of competitive Athlon XP processors.

"In response, Intel launched an illegal campaign to deprive AMD of distribution channels and consumers of product choice and lower prices," the New York suit said. "In order to achieve exclusivity or severe limitations on an OEM's purchase and offering of AMD products, Intel paid hundreds of millions – in some cases billions – of dollars in "rebates." Although Intel tried to disguise the anticompetitive nature of these payments, they bore no genuine relationship to pro-competitive, volume-based discounts or reasonable efforts to meet specific competitive offers."

AMD, naturally, supported New York's action.

"The New York Attorney General's 83-page complaint, filed on behalf of New York State consumers and governmental entities, details explicit evidence of Intel's harm to U.S. consumers and computer manufacturers," said Tom McCoy, AMD's executive vice president of legal, corporate and public affairs, 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."

Specific allegations included Dell, to which Intel allegedly paid more than $2 billion in rebates in 2006; Hewlett-Packard, which Intel allegedly paid "hudreds of millions of dollars" in exchange for an artificial cap of 5 percent market share at the OEM; and IBM, which Intel allegedly paid $130 million not to develop an AMD-based server product.

Like the EU investigation, Cuomo's office also provided anecdotes and quotes that they said justified their findings. In one case, for example, a Dell internal email warned of the psosibilities that might happen if Dell chose to buy AMD processors. ""PSO/CRB [Intel CEO Paul Ottelini and Intel Chairman Craig Barrett] are prepared for jihad if Dell joins the AMD exodus," an unnamed executive wrote in 2004. "We [will] get ZERO [rebates] for at least one quarter while Intel 'investigates the details' - there's no legal/moral/threatening means for us to apply and avoid this."

Likewise, an HP executive also sent the following email in Sept. 2004, according to the suit: "If you do [market products from an Intel competitor] and we get caught (and we will) the Intel moneys (each month is gone (they would terminate the deal). The risk is too high. Without the money we do not make it financially."

Third-party reactions varied.

"Mr. Cuomo's suit rests on the fundamentally flawed assumption that Intel's high market share is indicative of market control," said Ryan Radia, associate director of technology studies for the Competitive Enterprise Institute, a conservative Washington think tank. "In fact, Intel and archrival AMD have been competing fiercely for over a decade, and both firms continue to invest billions of dollars each year in researching and developing faster, more efficient chips," Radia observed."

Others asked for Intel to come clean.

"It is time for Intel to admit its misconduct, repair the harms it has perpetrated and change its business practices," Ed Black, president and chief executive of the Computer & Communications Industry Association, said in a statement. "Its legal strategy is clearly not working and its broad claims of innocence are being shown to be more hollow each passing day.

"Intel is a great American company, which unfortunately made poor choices," Black added. "Continued denial of reality undermines its ability to have its conduct treated as aberration, rather than central to its character. The quicker Intel owns up to its actions the quicker it, and the entire computer industry, can move on. I am confidant that by returning to a business strategy based on innovation and fair competition, not coercion and bully tactics, Intel can salvage its good name and still be successful. In the process, consumers, innovation and the economy will greatly benefit as well."

In 2006, AMD said it would build a foundry in New York. The fab will now be owned by GlobalFoundries, AMD's manufacturing spinoff.

Editor's Note: This story was updated at 12:51 PT with comments from the CEI and CCIA and again at 3:27 PT with comments from Intel's Mulloy.