Has Intel Played Unfair In Chip Market?

In a lawsuit filed today, the New York State Attorney General claims that giant computer chip maker Intel has played unfair in the competitive computer chip marketplace. At the heart of AG Andrew Cuomo's lawsuit against Intel are billions of dollars worth of rebate payments that Intel made to computer hardware sellers Dell, HP and IBM. Attorney General Cuomo believes that these payments were made to IBM, Dell and HP as an incentive for them to not buy cheaper computer chips from Intel rival AMD. Once again, there is a fine line in U.S. law between competition and one company using it's massive size to try and destroy a smaller competitor.

While I believe it's a good idea for the New York Attorney General to take a close look at Intel's competitive practices, in the end - I believe that he is likely to lose his lawsuit because the illegal payments he is alleging that Intel made were in the form of rebates that were tied to actual chips that were sole to Dell, IBM and HP. For a long time, hundreds of manufactures have used rebates to entice both manufactures of goods and services as well as retail customers to increase retail sales. Almost every time I buy something at "Best Buy", there is some kind of rebate offer available to me at the check out counter. Are rebates to companies like Dell, IBM and HP really that much different than ones that are offered to consumers at retail locations nationwide?

The real issue here is how the current U.S. federal government views members of the corporate world. To AG Cuomo and the people at the U.S. Justice Department, huge companies like Intel are probably looked upon as evil or they would have never grown so large in the first place. So, when a smaller company like AMD claims that a larger one like Intel is using it's size to try and put them out of business, there are already willing ears available in Washington and New York State to believe their charges without really trying to see if illegal activity is happening. That said, it is in the best interest of all Americans to make sure that large companies are not breaking the law in order to continue to increase their market share at the expense of smaller competitors and future consumers. To me, what Intel is doing in the computer chip market is no different that what Wal Mart does in small town America everyday.

Large companies become even larger by pushing out their smaller competition by selling products and services at a cost their competitors cannot compete with. It's a fact that AMD chips are cheaper than Intel's, so Intel must try and convince consumers that their computer chips are worth the extra difference in price. During good economic times, it is likely easier for Intel to make the case that their computer chips are better than AMD. However, right now - sales of personal computers and laptops are lagging well behind previous years, because of the 2009 recession. If indeed Intel is breaking the law then they should be punished and they should stop those practices. However, I have a gut feeling that AG Cuomo's lawsuit against Intel is likely more based in political correctness than in actual law and that is why I believe he is likely to lose his case when it is presented to a jury.