Dell Caught Up in NY State Anti-trust Case with Intel
Dell attempts to clean up its PR image after its recent cost cutting measures and factory closings has hit another hurdle. NY State Attorney General, Andrew Cuomo, filed a federal lawsuit against Intel, similar to the one that was recently decided in the European Union, that alleges that Intel aboused its monopoly power by paying computer manufacturers to use its chips over its competitor, AMD.
What is damaging for Dell, are a number of internal documents found during the court’s discovery process which singles out Dell as the largest recipient of payments under the scheme.
“In pure dollar terms, Dell was far and away the leader in receiving Intel’s largess,” the complaint alleges. “For example, over the four-year period from February 2002 to January 2007, it received approximately $6 billion in ‘rebates.’”
The complaint continues. “Most of this money was furnished to Dell under programs initially titled ‘MOAP’ and then ‘MCP.’ ‘MOAP’ was an acronym standing for “Mother of all Programs,’” according to the document. MCP stood for “Meet Competition Payments.” Both referred to Dell’s global percentage based rebates and to lump-sum payments made by Intel to Dell during the relevant period, according to the document.
The attorney general cites a 2002 Dell document titled “Intel Funding Overview” that allegedly states that Dell loyalty to Intel means “no AMD processors.” The complaint alleges that increases in Dell’s MOAP was tied to excluding AMD products from its lineup.
The attorney general also makes some alarming allegations about the extent to which Dell’s net income was tied to rebates. “A comparison of Dell’s reported net income with the rebates it received from Intel for some quarterly periods show that, by 2004, the rebate payments amounted to more than a third of Dell’s earnings,” the complaint alleges.
The document continues: “In 2006, Dell received approximately $1.9 billion in rebates….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 percent of net income ($776 million). The following 3 months, between May and July of 2006, the proportion was even higher, 116 percent ($554 million of rebates and $480 million in net income).”
