Intel

For Whom the Dell Tolls

by Carolyn Homer on June 30, 2010

in Odds & Ends, Regulation, Tech & Telecom, Trade

Less than fifteen years ago, Dell computers were the hot desktop brand. In a rapidly growing market, Dell developed a unique business model which helped to price out competitors. By 2004, Dell had become the market leader in desktop computer sales. Business school case studies focused on Dell’s extraordinary success.

With this prominence, Dell found itself implicated in antitrust lawsuits brought by the FTC against Dell directly (1996), against Microsoft (1998), and most recently against Intel (2009).

Yet these antitrust lawsuits had little effect on the dynamic personal computer market. The FTC ‘s suits had the pretense of promoting competition – a measure that was unnecessary in an industry where competition is already fierce. Consider the graph above tracking the market share of various desktop brands since 1997. Note that even the industry leaders only comprise about 50% of the total market.

dellmarketshare 

Dell’s decline started when it failed to perpetuate its initial successes and respond to the changing market. As the New York Times wrote yesterday, Dell is currently embroiled in a lawsuit against Advanced Internet Technologies, which alleges that Dell knowingly sold defective computers in the mid-2000s.

This should serve as a reminder to the FTC. Before jumping to accuse businesses of anti-competitive conduct, they should remember to look at the state of the actual, thriving, competition. Corporations that seem abundantly successful today often self-destruct or fall prey to unanticipated market forces tomorrow. Competitors lie in wait to take advantage of any weakness. From the New York Times:

“Dell, as a company, was the model everyone focused on 10 years ago,” said David B. Yoffie, a professor of international business administration at Harvard. “But when you combine missing a variety of shifts in the industry with management turmoil, it’s hard not to have the shine come off your reputation.”

Before diving into antitrust investigations against Google, Apple, or any other tech company, it would behoove the FTC to remember that important lesson — markets change.

Antitrust as Corporate Welfare for Aggrieved Competitors

by Ryan Young on December 9, 2009

in Economy, Legal, Politics as Usual, Regulation, Regulation of the Day

Wayne Crews and I have an article in today’s American Spectator about the antitrust crusade against Intel. Our key points:

-An FTC picking winners and losers is not capitalism. It is crony capitalism.

-Chips in “Wintel” desktop computers increasingly constitute just one subset of a vast semiconductor market. Only a small fraction of the chips in non-PC devices are Intel’s — and these devices are where the future lies.

-Regulators’ charges against Intel have changed over the years, but their verdict always remains the same: guilty. Suspicious.

-We’d be better off prosecuting the DOJ and the FTC for colluding against free enterprise.

LibertyWeek 69: Feeding the World with Property Rights

by Richard Morrison on November 17, 2009

in CEI Projects, Podcast

Richard Morrison throws in with Jeremy Lott and William Yeatman to bring you Episode 69 of the LibertyWeek podcast. We start by pigging out on swine flu statistics, putting off action on global warming and wagging our finger at a corrupt judge. We proceed with the fight between Intel and AMD and wrap up with an interview with CEI Senior Fellow Gregory Conko on how to end world hunger.

Andrew Cuomo Sues Intel

by Ryan Young on November 13, 2009

in Deregulate to Stimulate, Economy, Legal, Regulation, Tech & Telecom

Over at the Washington Examiner‘s Opinion Zone, Wayne Crews and I explain why New York Attorney General Andrew Cuomo’s antitrust lawsuit against Intel is a mistake.

Calling Intel’s business practices “bribery” and “coercion” is little more than argument by assertion. Rebates and exclusivity deals are normal competitive behavior. Not only is Intel facing increasing competition in its home turf, that small segment is hardly the extent of the relevant competitive market. Intel faces an uncertain future as consumer tastes shift to smaller products powered by non-Intel chips. Cuomo’s antitrust lawsuit does not stand up to scrutiny. It deserves to be dropped.

Antitrust policies thwart the competitive process whenever and wherever they are applied.

Intel Settles With AMD

by Elizabeth Jacobson on November 12, 2009

in Tech & Telecom

Intel and AMD have announced a settlement in their 4-year legal antitrust battle. As per the agreement, Intel will pay AMD $1.25 billion, an amount that’s likely far less than what they would have owed had Intel lost it’s case in court. Intel claims that it will not change its business practices because they were never illegal in the first place.

Hopefully, this agreement between private companies will send a signal to the Federal Trade Commission, New York Attorney General Andrew Cuomo, and European Union regulators. Each has targeted Intel in the past, with the EU’s case against the company resulting in a fine of $1.5 billion. If two companies can agree that no unfair business practices are going on, it’s difficult to see where that leaves a federal case against them, especially considering that consumers don’t appear to have been negatively affected by the increasingly fast (and ever-cheaper) processors that have been coming to market in the past decade.

While it remains unclear what impact this agreement will have on Intel’s other legal troubles with both the federal government and European Union regulators, consumers can take heart knowing that this truce has the effect of freeing up vast resources for both companies that would have otherwise been wrapped up in legal costs. Intel and AMD can quit taking jabs at each other and get back to building newer, faster, cheaper processors.

LibertyWeek 68: Take from the Rich, Give to Yourself

by Richard Morrison on November 9, 2009

in CEI Projects, Features, Podcast, Zeitgeist

Your host Richard Morrison teams up with Jeremy Lott and Josh Barro to bring you Episode 68 of the LibertyWeek podcast. We start with Saturday night’s healthcare vote in the House, Freddie Mac’s losing bets and a gift card scandal in Charm City. We then move on to Andrew Cuomo’s attack on Intel in New York and Josh tells us why we can expect more tax hikes in the future.

NY Attorney General Files Antitrust Suit Against Intel

by Wayne Crews on November 4, 2009 · 1 comment

in Features, Legal, Regulation, Tech & Telecom, Zeitgeist

A statement from New York Attorney General Andrew Cuomo this morning announces the launch of an antitrust lawsuit against chipmaker Intel. Intel supposedly is “bribing” and “coercing” computer manufacturers like Dell, HP into using its chips.

Intel gives them money and rebates to use Intel chips. Think about that; they don’t have to pay as much, and get paid themselves, to use Intel chips rather than AMD ones.

I like it when I get rebates and cash, myself, but I’m just crazy.

Let’s remember what abusive monopoly power is supposed to mean: reduced quantity sold, higher prices, suffering consumers. They’re “suffering” all right, with a plethora of wildly popular sub-$400 netbooks, thanks to a complex and efficient marketplace in which Intel plays an important role, along with all its business partners.

Intel does not enjoy government protection of its market share, nor does it operate in a vacuum, immune from discipline if if its rebates and “bribes” (note the language used by enforcers!) are somehow bad deals for consumers or computer makers. Intel has upstream suppliers, and downstream business customers that can revolt against and thereby discipline any monopolistic behavior, or exclusive arrangements that are unsatisfactory. If the downstream partner doesn’t make a sale, neither does Intel. If the downstream partner’s hardward sales suffer because of Intel, it can retaliate. Thus as far as abusive behavior is concerned, the market is self policing. The only thing that could prevent computer makers themselves from ganging up against Intel abuses would be the antitrust laws themselves.

Antitrust, more often than a consumer-protection phenomenon, is often protectionism. In this case, government bodies are deciding we have to buy from AMD and not Intel, and AMD gets protected from the ravages of competition. Consumers lose.

As far as competing chipmakers are concerned, they of course have no fundamental right to Intel’s customers. However they do have a right to make their own deals with computer makers more satisfactory than Intel’s. Opportunities abound in PCs, laptops, and netbooks; and moreso in handhelds that are gaining appeal and yet don’t rely on Intel.

Furthermore, why should AMD be the beneficiary of antitrust interference? Most chips are not found in PCs at all, but in vehicles and in appliances and handheld devices and gadgets of all sorts. You’ll find chips in new automobiles, coffeemakers, rice cookers, cell phones, watches, calculators, the pump at the gas station. They flush the toilet for you at the airport and turn on the sink; you don’t have to touch a thing thanks to the microchip. These might want a piece of the PC action; it’s a rhetorical and nonsense question, but why not forbid AMD from getting the market share and give it to these guys?

As particle physicist Michio Kaku noted in his remarkable book Visions, “By 2020, microprocessors will likely be as cheap and plentiful as scrap paper, scattered by the millions into the environment, allowing us to place intelligent systems everywhere.” Chips in “Wintel” desktop computers increasingly constitute just one subset of a vast semiconductor market. And guess what; fewer and fewer of the chips in non-PC devices are Intel’s. The trajectory of the marketplace is hyper-competitive, and there is no need for this antitrust action to warp things.

Some of us might be more impressed if Cuomo presented a thoughtful critique of governmental licensing and protection in his own legal industry, so that paralegals and other professionals could compete with monopoly lawyers. Now there is a realm of genuine monopoly power.

Nvidia Rumored to Compete in Supposedly Uncompetitive Market

by Elizabeth Jacobson on November 4, 2009 · 6 comments

in Tech & Telecom

Rumors abound that graphics chip maker Nvidia is getting set to enter the x86 processor market. Recall that, according to AMD’s lawyers, the processor market is uncompetitive and being unfairly monopolized by Intel.

Now, if the antitrust lawyers are correct, and the CPU market is uncompetitive and needs government intervention, then there must be some barriers to entry that are keeping other competitors out of the market, allowing Intel to reap outrageous profits. However, if Nvidia can and does enter the processor market and supply an alternative processor product line, where would that leave the antitrust argument?

Corporate Human Rights?

by Ryan Young on October 6, 2009 · 1 comment

in Deregulate to Stimulate, Economy, International, Legal, Regulation, Tech & Telecom

Over at the Detroit News, Hans Bader and I explain why corporations have human rights despite not being human. The reason why? Transaction costs.

This has implications for everything from Intel’s EU antitrust battle to newspapers’ free speech rights.

Intel Appeals Record-Breaking EU Fine

by Elizabeth Jacobson on September 16, 2009 · 3 comments

in Features, Tech & Telecom, Zeitgeist

Intel is in the news again, this time for fighting the European Commission’s record-shattering $1.4 billion fine against the company. In its appeal, Intel accuses the Commission of having failed to prove that Intel’s allegedly anticompetitive tactics actually harmed consumers in any way.

Recall that it wasn’t a consumer group that brought this case against Intel. Rather, this case was pushed by its rivals. In fact, both Intel and its closest competitor, AMD, have spent hundreds of thousands of dollars on lobbying in the second quarter of 2009 alone, of which much was devoted to antitrust-related issues. As more antitrust allegations mount against Intel, rest assured that these amounts will increase considerably. Instead of investing in things that will actually provide more value to consumers, like price cuts or research and development, chipmakers will have to divert that money towards playing the Washington game.

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