"Rather than compete fairly, Intel used bribery and coercion to maintain a stranglehold on the market," Attorney General Andrew Cuomo said in a statement.

"Intel's actions not only unfairly restricted potential competitors, but also hurt average consumers who were robbed of better products and lower prices," Cuomo said.

"These illegal tactics must stop and competition must be restored to this vital marketplace," he added.

The lawsuit accused Intel of engaging in "a systematic worldwide campaign of illegal, exclusionary conduct to maintain its monopoly power and prices in the market for x86 microprocessors," the 'brains' of personal computers.

It accused the company of "exacting exclusive or near-exclusive agreements from large computer makers in exchange for payments totaling billions of dollars" and threatening retaliation against firms that did not fall in line.

Retaliatory threats allegedly included cutting off payments from Intel, funding competitors, and ending joint development ventures.

To obtain exclusive agreements, Intel was accused of paying so-called "rebates" to computer makers of billions of dollars in some years.

"These rebates were actually just payoffs with no legitimate business purpose that Intel invented to disguise their anticompetitive nature," the Cuomo statement said.

The lawsuit seeks to "bar further anticompetitive acts by Intel, restore lost competition, recover monetary damages suffered by New York governmental entities and consumers, and collect penalties."

The suit is the latest legal challenge for Intel, which is already being investigated by the US Federal Trade Commission and has been sued by its main rival Advanced Micro Devices (AMD), in a case expected to go to trial next year.

European Union antitrust regulators fined Intel a record 1.06 billion euros (1.45 billion dollars) in May, claiming the company abused its stranglehold on the semiconductor market to crush AMD.

Intel denied the charges and has appealed the EU ruling.

Intel spokesman Chuck Molloy also rejected the latest allegations.

"We disagree with the New York attorney general," he told AFP. "Neither consumers, who have consistently benefited from lower prices and innovation, nor justice are being served by a decision to file a case now.

"Intel will defend itself," he said.

Tom McCoy, an AMD executive vice president, said the lawsuit "details explicit evidence of Intel's harm to US consumers and computer manufacturers.

"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," he said.

Ed Black, president and chief executive of the Computer and Communications Industry Association, said Intel needs to "admit its misconduct, repair the harms it has perpetrated and change its business practices.

"The quicker Intel owns up to its actions the quicker it, and the entire computer industry, can move on," he said.

The lawsuit accuses Intel of paying US computer maker Dell nearly two billion dollars in "rebates" in 2006.

Another US computer maker, Hewlett Packard, was allegedly paid hundreds of millions of dollars in rebates in return for an agreement to cap HP's sales of AMD-based products at five percent of its business desktop personal computers.

US computer giant IBM was allegedly paid 130 million dollars not to launch an AMD-based computer server product, according to the lawsuit, which cited internal documents and e-mails.

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