The battle continues

It wasn’t long time ago when Intel and AMD had a lawsuit settlement. Now, the FTC is turning the heat up on Intel by accusing it of “threats, bundled prices, or other offers to encourage exclusive deals, hamper competition, or unfairly manipulate the prices of its”. Looks like times are getting rough for Intel.

This piece of news was a bit awkward for me since I had the impression that the FTC wasn’t too much into antitrust law enforcement lately. Now that this situation has happened I have good reasons to believe that American policy makers have changed gears when it comes to fair market competition.

It is a known fact among the innovation management circles that monopolies tend to slow down innovation. Antitrust law is there to put in place the market fairness that is needed to encourage innovation.

The only issue was that not all U.S. administrations executed antitrust law in the same manner. When the position of leading American firms where good on global markets, American administrations had the reflex to cool down on antitrust law. But when things get rough in International scenes, the FTC was always there to make sure competition is happening in the local U.S. market.

Therefore, when I see that the FTC is stepping up and going for a Intel hunt, it kind of rings a bell for me. It makes me realize that American dominance of semiconductor industry seems to be in danger because the main guy (Intel) had a too easy for while and forgot about innovating.

Furthermore, AMD has to deal with the fact that it has to fight the legal battleground against a much stronger opponent. When one considers the complexity of the legal system and the kind of legal expertise Intel has access to, it is unavoidable that a settlement for only a portion of the damage can be recovered through legal means.

Why bribery?

The funny thing is that AMD is not the only player in the industry to suffer from Intel’s trust with PC manufacturers. To be convinced of this statement, we must ask ourselves the following question: why does Intel have to resort to anti-competitive behavior? The main justification behind such behavior is that Intel does not believe its product to be competitive against that of AMD. Knowing that the market’s natural response would be to turn to the better product, Intel used the good old bribery technique to keep its clients faithful.

Consumers and innovators suffer

When big PC manufacturers (like HP and Dell) are in bed with Intel, consumers are stuck with buying an inferior technology that is the main one available on the market. Furthermore, when HP and Dell go for Intel because of some deal made under the table, AMD has to absorb hug losses. This is because all that money invested in R&D is flushed down the toilet. All the economies of scale that would have eventually rewarded AMD in the form of return on investment is now transferred to the inferior product. That same economies of scale that would have brought a better product for a lower price are now transferred 1) to PC manufacturers’ decision makers, and 2) Intel in the form of more orders for its product.

Failure of antitrust law

As we can imagine, the consequences for the whole industry are disastrous: both innovator and consumer lose money and the crooked gain money. Of course, antitrust law is there to avoid this kind of situation by protecting the market from unfair competition and the consumer from the monopolist’s tyranny. Unfortunately, legislation is not structured in a way that would effectively prevent these things to happen. As we can see in the case of AMD vs Intel, AMD had to make do with a settlement for a fraction of what it lost.