The FTC complaint accuses Intel of waging an illegal, systematic campaign to shut out its competitors, ultimately hurting the consumer.
The FTC says, "It's been running roughshod over the principles of fair play and the laws protecting competition. The commission's action today seeks to remedy the damage that Intel has done to competition, innovation, and ultimately the American consumer."
Santa Clara-based Intel released an audio statement on their website saying the lawsuit is unwarranted and misguided.
"Intel has not violated the law. Litigation is not our choice but now that we have been sued, we will aggressively defend ourselves and we look forward to a successful resolution of the FTC's claims," Intel general counsel Doug Melamed said in the statement.
Wall Street Journal online technology editor Julia Angwin says Intel pays companies to use its chips exclusively and calls those payments rebates.
"There were some emails that came out saying Dell was getting $1 billion a year not to use competitors' chips," Angwin said.
Angwin says Intel has been accused of similar charges for a decade. It already paid a $1 billion fine to European Union regulators and is appealing a $1.25 billion settlement with competitor Advanced Micro Devices.
AMD says, "The FTC's action against Intel is good news for consumers. It is yet another example of regulators around the globe acting to protect consumers by enforcing competition laws."
Not all consumers feel they need protection.
"Intel has done what we need and they provide a solution that's acceptable to me and I'm fine with their tactics," Mike Obot said.
"It's the best, right? So as a consumer you don't complain you just go with it," Gabe Banderas said.
But the FTC says the world's largest chip maker might not be the best.
"The FTC says pretty aggressively that Intel has a history of underperforming, so basically not only are they accusing them of bullying, but also that the chips were less good and they were using bullying tactics to overcompensate for them," Angwin said.
The complex case which has so many in the Silicon Valley watching is likely to take months to begin and it could be years before it is settled.