A quick note on Intel

Geoffrey Manne —  13 May 2009

I am curious about something.  AMD and Intel have been competing head to head for more than 15 years, at least since AMD released its Intel 386 clone in the early 90s.  In that time, inarguably, microprocessor prices have plumeted and  processing power and other features have increased dramatically (I’m aware that we don’t know what the but-for world would look like, but these effects have been enormous).  If you search the web you can find countless articles on price wars between AMD and Intel, and of course we all know about Intel’s rebates and other price-cutting maneuvers.  So for more than 15 years (or, in the EU’s investigation, at least since 2002) Intel has been taking a hit on prices, biding its time, according to the European Commission and AMD, until it can finally rid itself of its meddlesome competitor (at which time, of course, no other competitor, not Nvidia, for example, nor IBM, will take AMD’s place).  For how long does Intel need to keep fighting this losing battle before the antitrust authorities would agree to sit on the sidelines, watching it play out to consumers’ great benefit?  What must all those Intel shareholders of yesteryear be thinking as they watched their profits squandered for a speculative future gain (again, according to antitrust plaintiffs, private and government alike) that has still failed to materialize?

Geoffrey Manne

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7 responses to A quick note on Intel

  1. 

    The following excerpt from an interview with Neelie Kroes says it all about how European anti-trust regulators and academics (and I suspect many in the US too) view competition. This is clearly about protecting competitors and not the competitive process.

    ——————-

    Q (in Dutch): Microsoft’s current market share is nearly 95%. To what extent can market share be a legal criterion to decide whether Microsoft is complying or not ?

    A (in Dutch): We know that one single producer has a market share of 95%. This is clearly a monopoly and this is not acceptable. No competitor has an incentive to enter such a market. I want Microsoft’s market share to diminish to significantly less than 95%. I can’t say that it has to be precisely 50% or whatever number, but it has to be significantly less than 95%.
    http://blog.actonline.org/2007/09/nellie-kroes-pr.html

  2. 

    Well, the bit about prices in the but-for world falling even faster might be unfalsifiable, but there are other testable implications of the relevant antitrust theories where we can start to compile some evidence. For instance, the anticompetitive theories suggest that over the relevant time period of Intel’s loyalty rebates we would observe AMD doing worse financially, and they also suggest that OEMs should be against receiving these rebates and complaining to their local regulator, right? Of course…one can dream up counterfactuals that might be consistent with what we actually observe AND the anticompetitive theory, but we should not underestimate the intellectual creativity required to do so.

  3. 

    Ah, yes. My parenthetical, “(I’m aware that we don’t know what the but-for world would look like, but these effects have been enormous),” was meant to defuse this claim. I will say that I think the burden should be on the other side, and the absurd claim that “this is great now, but we know it will be a problem later” is so much more shorn of evidence than the claim that the complained-of behavior seems to be doing pretty well for consumers today, that the charge is pretty hypocritical.

  4. 

    Dom Armentano asked this question about Standard Oil in his _Antitrust and Monopoly_. F. M. Scherer, in a snarky review of the second edition, accused Armentano of making a freshman-level mistake. Sure, he said, oil prices were falling rapidly during the period in which Standard was supposedly engaged in anticompetitive practices, but if it weren’t for Standard’s conduct, prices would have fallen even more! It’s an ingenious, and basically unfalsifiable, argument.

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