Memo 11: Can we really trust Anti-trust?

This blog talks about Anti-Trust and the Laws that are associated with its practice:

What are Antitrust Laws for?

"Broadly speaking, antitrust laws seek to promote fair competition on the merits and to protect consumers and businesses from anti-competitive business practices. The antitrust laws therefore forbid the wrongful acquisition of monopoly power, the abuse of monopoly power even if it was properly acquired in the first place, and other business practices that improperly stifle or suppress free competition. "1

Personally I find this topic extremely intersting, particularly how the need for Anti-Trust action, builds till a point where it boils over and then catches the public eye in a series of publicly made statements, disputes etc. between the involved parties.

The Microsoft Anti-trust case of course is one of the most obvious choices to examine for the purposes of this blog. But I'd like to go into one that is still a very hot topic, and one that is yet to be resolved. In all cases, what is happening is that these anti-trust laws, in conjuction with the legal system find themselves being employed primarily in a high-tech environment, where the lines a blurry enough for even the most qualified neutral party, and what the judicial system has to try to do is draw straight lines around curves at times. The interesting thing about science is that there are several ways to prove something, by induction, observation and so forth, and sometimes, the results themselves can come out differently depending on the method we choose. So in this particular case, where among other more distinct Anti-trust behaviour patterns that AMD claim Intel have been engaging in, AMD claim that Intel produce bad benchmarks that fool the public. Well, we'll get into that a bit later, lets look at why AMD claim Intel is being found guilty of Anti-trust behaviour. The following points are from the legal complaint that was put forward to the Federal District Court of Delaware for violations of the Sherman Antitrust Act and the California Unfair Competition Law.

• Intel has forced major customers into exclusive or near-exclusive deals;

• it has conditioned rebates, allowances and market development funding on customers’ agreement to severely limit or forego entirely purchases from AMD;

• it has established a system of discriminatory, retroactive, first-dollar rebates triggered by
purchases at such high levels as to have the practical and intended effect of denying customers the freedom to purchase any significant volume of processors from AMD;

• it has threatened retaliation against customers introducing AMD computer platforms, particularly in strategic market segments;

• it has established and enforced quotas among key retailers effectively requiring them to stock overwhelmingly, if not exclusively, Intel-powered computers, thereby artificially limiting consumer choice;

• it has forced PC makers and technology partners to boycott AMD product launches and promotions;

• and it has abused its market power by forcing on the industry technical standards and products which have as their central purpose the handicapping of AMD in the
marketplace.

So what AMD are fighting against is that Intel are abusing their power, threatening the market with discriminatory pricing, ruling the competition out through supplier based stipulations to various manufacturers and in general forced the industry to turn a blind eye towards potential competition. They believe that the end result is that, end-user choice is artificially limited and that a more open market will lead to the end-user having the best technology they can possibly get.

My view is that, behind the scenes each government that makes its decision will need to first query within itself what the best interest are for its economy and how exactly they will define Anti-trust. The best part of all of this is that, the two companies in the public eye that are being charged with Anti-trust behaviour, Microsoft and Intel, were and perhaps still are world leaders in their field. I am not pro Intel or Microsoft, but one of the reasons why they are where they are is because of their ability to drive the industry forward, the genuinly had, at some stage a very good product. How they marketed it may have been a different story altogether. Perhaps at this given time, both of them may be in a period of slightly less productivity, but productivity is not a linear process, it is a stepwise incremental function. A fairly accurate analogy can be drawn to a sportsperson, where they improve in steps rather than a straight line, which is why they are paid well, because after all the early years of practice etc. they only truly have about 5-10 years of competitive practice in which to earn, and consider the thought of a cripling injury? So they make the most of what they have when they have it. Compare that to a normal human being, that has a career that lasts almost double that in most cases, things are far more controllable.

So in essense would it be fair to say an established athlete must be penalized, for not performing as well as he/she used to? Adding that, when they were doing well, they had all the attention from all the sponsors? I think not, I think the choice lies with those who choose to sponsor, namely all the brand manufacturers who subscribe to Intel as a sole processor provider. It is they who must use their volition to choose AMD or Intel, and should AMD provide a better service and show the kind of continued presence in the industry, then they will surely displace Intel as the processor manufacturer of choice, till then, its understandable that they will remain in the after-glow of Intel's achievements, rather than try and trip Intel up, where they may just be trying to retain market share in a moment of change, perhaps to their central architecture as it tries to prepare itself for the next step up in processor technology.

Change is the price of survival, and Intel may just be paying the price in the short term, I doubt we need complicated legislation to motivate these fundamentals. Do you think AMD would not have done exactly the same thing, and be willing to pay the price of being prosecuted legally for an extended market share offer? I think the rules of the economy state it fairly clearly what they would have done, its a cycle that will always exist, like two children and a candy bar.

Reference:
1. Madonado & Markham LLP
2. AMD