Wednesday, May 13, 2009

EU slams Intel

CNN reports the details here. This just screams of foolishness. Let me see if I can get it all out.

- "...Intel violated European antitrust laws by unfairly paying computer makers to delay or even cancel products that contained chips made by rival AMD."

1) On a humorous note, is this to say that there's a fair way to pay computer makers, but Intel just failed to do that?

2) On a more serious note, if accepting Intel's payment for not producing these machines reflects their revealed preference of being better off, how is this bad? Isn't the company choosing their best option, with voluntary action on all sides? There could be an issue of contracting to make machines with AMD processors in them that never got made, but that's an issue of contract violation between AMD and the computer manufacturers-- that doesn't concern Intel at all.

- "Intel has harmed millions of European consumers by deliberately acting to keep competitors out of the market for computer chips for many years..." How? If Intel's action kept competitors out of the market-- and that's a tenuous claim, at best-- then it took that action in the face of competition. It's competition that we need to focus on here, not direct competitors. A local river rafting company may have no direct competitors in the market for river rafting, but it is still forced to offer the best services due to substititution-- hiking, biking, or maybe just riding the river on your own accord. Similarly, even if they did keep competitors out of the marketplace, they are still subject to competition from a whole range of computer substitutes.

I also fail to see how Intel's action is really any different than simply buying every AMD-built computer and throwing it away.

- Though the most interesting part of the piece: "Intel's stock was up 16 cents in pre-market trading to $15.37 a share."

1 comment:

Justin M Ross said...

Agreed, unless there is a contract violation here this is equivalent to these computers being purchased and thrown away. If AMD is not paid until the final sale then the manufacturers are acting in bad faith.

I am completely amused at how similar Intel's actions would be to a Keynesian stimulus plan. Dig a hole, fill it up. Buy a computer, throw it away. Stimulus.