Intel (Nasdaq: INTC) is in hot legal water
again.
New York Attorney General Andrew Cuomo (no relation to
Weezerfrontman Rivers Cuomo, as far as I can tell) has
filed a federal antitrust suit against the chip giant. The
suit alleges (stop me if you've heard this before) that Intel
unfairly kept rival
Advanced Micro Devices (NYSE: AMD) from
selling chips to major system builders like
Dell (Nasdaq: DELL),
IBM (NYSE: IBM), and
Hewlett-Packard (NYSE: HPQ).
Cuomo's suit rests on much the same evidence that inspired
European regulators to
slap Intel with a $1.45 billion finea few weeks ago. The
legal framework in Europe is a little bit different from the
American system, and the central issue of loyalty rebates
seems to be less tempered by trial by fire in our courts than
in theirs. The attorney general's action may encourage the
FTC to take action against Intel, much like it did against
Microsoft (Nasdaq: MSFT) years ago, but the
outcome of the lawsuit itself is by no means a slam-dunk
win.
Cuomo's office has been working on this case for two
years, and
AMD's private antitrust complaintagainst Intel is nearly
four years old. Nobody should be surprised by today's action,
in other words. The European decision might have been the
final straw that broke the camel's back. But Cuomo could also
be using the suit as a campaign tool; he is expected to run
for governor of New York next year. He is making quite a name
for himself by launching investigations into
mega-corporations like Intel and
Bank of America (NYSE: BAC).
Whatever the motivation, the potential influence on the
FTC's investigation is probably more important than this
specific lawsuit itself. The FTC has the power to
force Intel's handlike it did Microsoft's; it can impose
changes that ensure Intel conducts business more fairly in
the future. That seems more valuable to me than a large fine
paid to some government agency. I don't really want Intel to
fund the bailouts, you know. Also, AMD's private suit could
win the underdog some
much-neededsettlement payments, if everything goes AMD's
way.
But it would take a truly massive fine to make a material
difference to Intel's balance sheet. Even the European
Commission's punishment, while very large and impressive,
amounts to nothing more than a slap on Intel's wrist. The
company has $13 billion in the bank and will survive any
reasonable amount of legal firestorms.
So the fallout and collateral damage is more interesting
to me than the lawsuit itself. As an AMD investor, I'm
supposed to hope that the dominoes start falling. But I
don't. I'd much rather see AMD making its bread in the
marketplace, on a level playing field, than in the courtroom.
I'm old-fashioned that way.
Do you think the legal attacks will make Intel change its
business practices -- or perhaps that this has happened
already? Share your thoughts in the comments below, dear
Fool.
This article was originally published as
Intel Is Under Legal Fire Again. Should You Care?on
Fool.com
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