Globalization has given firms across the globe the opportunity to reach clients in any part of the world. However, with this opportunity comes stiff competition from other firms across the globe. A case in point is the Intel Corporation. In the last decade, the firm has faced stiff competition from Advanced Micro Devices (AMD) (Lévâque, 2010). As a result, it chose to employ unorthodox business practices to retain its market monopoly. The practices infringed antitrust laws, both in the U.S. and Europe, prompting investigations that found Intel culpable (Lévâque, 2010). This article explores the antitrust behavior exhibited by Intel during the superiority war that ensued between the two firms when the AMD attempted to release its x86 CPUs ahead of Intel.
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Intel’s Antitrust Behavior in Perspective
The war in question ensued when Intel discovered that AMD had successfully developed x86 CPUs and was already trying to sell them to major computer manufacturers (Lévâque, 2010). At the time, Intel was yet to develop a similar product. In other words, Intel’s computer chips were inferior to what AMD had at the time. Sensing defeat, Intel colluded with its key OEM customers to bar AMD’s x86 CPUs from entering the market (Lévâque, 2010). Consequently, Intel was investigated for antitrust behavior by the State of New York, the Federal Trade Commission (FTC), and the EU and was found culpable (Lévâque, 2010).
Intel paid Dell three hundred million U.S. dollars quarterly for five years to discourage it from purchasing AMD’s x86 CPUs for use in its computers (Lévâque, 2010). Similar payments were made to HP to discourage it from using AMD’s x86 CPUs. Intel also paid Acer and Lenovo, which had already bought and used AMD’s x86 CPUs in some of their computers, to delay the release of those computers to the market (Tung, 2014). It sought to maintain a monopolistic hold on the market. However, it instead lost billions of dollars in terms of the payments it made to the mentioned firms and fines. It also denied end-users the utility they would have derived from computers fitted with AMD’s x86 CPUs by forcing them to buy computers fitted with its chips. These actions were found to violate Section 2 of the Sherman Act (Lévâque, 2010).
Intel’s antitrust behavior shows that in most cases, monopolies and oligopolies are bad for society. By forcing computer manufacturers to use only its chips, Intel denied end users the freedom to choose the chips they preferred. The issue is aggravated by the fact that AMD’s x86 CPUs were ready for use by 2003, but Intel ensured that no computer fitted with the chips entered the market until much later (Lévâque, 2010). The firm denied computer users better technology to maintain a monopolistic market structure. This example shows that monopolies and oligopolies often impose inferior products and high commodity prices on consumers. As such, they can only be beneficial to society in exceptional cases.
Monopolistic market structures do not encourage innovation because there is no pressure on the dominant firm. As such, only firms that have the interests of their consumers at heart can benefit the society in which they are dominant. Oligopolistic market structures for their part can sometimes be beneficial. For instance, the war between Coca-Cola and PepsiCo gives society better quality beverages as well as competitive prices (Hampp, 2012). It should, however, be noted that this is an exceptional case because conventionally, oligopolies are characterized by imperfect competition. Sometimes firms that operate in oligopolistic markets engage in price-fixing to maintain high-profit margins. As such, the bottom line is that monopolies and oligopolies are bad for society because they jeopardize liberalization.
Hampp, A. (2012). The Cola Wars. Billboard, 124(15), 18-25.
Lévâque, F. (2010). Law and technology Intel’s rebates: Aboveboard or below the belt? Communications of the ACM, 53(6), 35-37.
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Tung, L. (2014). Intel loses fight against €1bn EU antitrust fine. Web.