Archive for the ‘Analysis’ Category
Thursday, January 7th, 2010
During the month of January 2010, the Antitrust & Competition Policy Blog held a Blog symposium on Section 5 of the FTC Act. As part of the blog symposium, Bob Lande wrote an essay arguing that the FTC’s case has gone beyond that of the European Commission and therefore is justified in using Section 5. Lande said:
“The Commission, however, added significant issues to the mix. First, it alleged similar exclusionary conduct involving another important relevant chip market, the market for graphic processing chips. Second, other counts charged fundamentally different types of anticompetitive conduct that might only have violated Section 5 of the FTC Act (paragraph 97 of the FTC’s Complaint). For this type of conduct the FTC apparently did not want to subject Intel to the nearly automatic private treble damage liability that would follow from a FTC finding that Intel violated the Sherman Act. Alternatively, the FTC might not have believed a Sherman Act violation would be called for or sustained by reviewing courts.
…It was quite logical for the FTC to keep its options open by pleading both pure Section 5 violations and also violations of Section 2 of the Sherman Act. In this way the Complaint keeps the Commission’s options open and flexible. The FTC ultimately can choose to use whatever mix of Section 2 and Section 5 theories the developing facts suggest.”
The full article can be found at the Antitrust & Competition Law Blog.
Posted in Analysis, CPU Market Competition, Discounting and Rebates, EC Case Against Intel, European Commission, FTC Case Against Intel, FTC Section 5, GPU Market Competition, Intel, US FTC | No Comments »
Thursday, January 7th, 2010
During the month of January 2010, the Antitrust & Competition Policy Blog held a Blog symposium on Section 5 of the FTC Act. As part of the blog symposium, Keith Hylton argued that FTC’s chances of victory are so low in their case against Intel, they must have alterior motives. Hylton believes:
“Since the FTC’s likelihood of victory is low, one has to wonder what’s behind this enforcement action. The most likely reason is that the FTC is pushing for a settlement that will result in the imposition of at least some of the restrictions. If the FTC gets the settlement it is looking for, it will create an informal layer of monopolization law that is closer to EU law than U.S. law – informal law that gets enforced by the threat of litigation costs rather than the decision of a court. Moreover, it will create a new function for Section 5 that is hard to square with its original purpose.”
The full article is available on the Antitrust & Competition Policy Blog.
Posted in Analysis, CPU Market Competition, Discounting and Rebates, FTC Case Against Intel, FTC Section 5, GPU Market Competition, Innovation and IP, Intel, US FTC | No Comments »
Thursday, January 7th, 2010
During the month of January 2010, the Antitrust & Competition Policy Blog held a Blog symposium on Section 5 of the FTC Act. As part of the blog symposium, Josh Wright wrote an essay arguing that the FTC is using Section 5 of the Federal Trade Commission Act to evade Section 2 monopolization law, and that is not a legitimate use of Section 5.
Wright suggests that the arguments provided by Commissioner Rosch and the other Commissioners for using Section 5 “fail to justify use of the Commission’s Section 5 authority in the Intel matter. Further, these arguments provide only a thin veil for what appears to be the more likely reason that the Commission is choosing to exercise its Section 5 authority against Intel – to evade the strict requirements of proof of competitive harm embedded into Section 2 of the Sherman Act.” He goes on to say:
“…Whatever one thinks about the competitive merits of Intel’s underlying conduct, the Commission’s use of Section 5 should be seen for what it is: an attempt to evade requirements to demonstrate consumer harm under Section 2 that exist to protect consumers from the social costs of false positives. Such an approach is bound to harm competition and consumers in the long run because it gives the Commission the option to apply its “watered down” standard to whatever business conduct it views as potentially problematic. This approach is a recipe for Type I error and should be rejected by fans of consumer-welfare based antitrust policy.”
The full article is available at Antitrust & Competition Policy Blog.
Posted in Analysis, CPU Market Competition, Discounting and Rebates, Economic Analysis, FTC Case Against Intel, FTC Section 5, GPU Market Competition, Innovation and IP, Intel, US FTC | No Comments »
Friday, January 1st, 2010
This article from Dan Crane of the University of Michigan Law School argues that the FTC’s decision to use its Section 5 authority in its case against Intel could backfire, and prevent the Commission from its attempt to reinvigorate its Section 5 authority. Crane has previously argued in favor of the FTCs assertion of independence from the Sherman Act (through enhanced use of its Section 5 authority), but believes that the Intel case is the wrong case with which to make the argument. He argues that:
Indeed, if anything, Intel poses a risk of seriously setting back the development of an independent Section 5 power by provoking a hostile appellate court to rebuke the FTC’s effort and cabin the FTC’s powers in future matters better suited to an independent Section 5.
The essential flaw in the Commission’s assertion of an independent Section 5 in Intel is that there is little or no connection between the Commission’s comparative institutional advantages over Article III courts and this case. The Commission should not make a break for Section 5 independence until it finds a case in which it can explain what facts about that particular case—and not about antitrust cases in general—justify judicial deference. Otherwise, the Commission runs the risk that courts will interpret its plea for deference as a request to be excused from the rule of law. There is a very real risk that courts will view Intel as an effort to achieve carte blanche permission for the Commission to run an antitrust program divorced from the strictures of the Sherman Act. Courts are unlikely to react sympathetically to such a perceived request.
The full article can be found here:Dan Crane-Reflections on Section 5 of the FTC Act
Posted in Analysis, CPU Market Competition, FTC Case Against Intel, FTC Section 5, GPU Market Competition, Intel, US FTC, Uncategorized | No Comments »
Tuesday, December 1st, 2009
Damien Geradin, the Director of the Global Competition Law Center at the College of Europe, writes that the European Commission’s decision against Intel proved neither foreclosure of the market to competitors nor any consumer harm (often considered prerequisites to any successful antitrust case). Geradin argues that:
A prima facie review of this Decision suggests that it contains a number of flaws that raise serious questions about its compatibility with EC competition law in particular and sound antitrust policy in general. These flaws include the facts that the Decision: (i) arguably relies in substance on a per se prohibition of conditional rebates recognized by the formalistic case-law of the Community courts, notwithstanding that the Commission had clearly indicated in various important policy documents, including its Guidance Paper on Article 82 EC, its intention to move away from this approach for an effects- based analysis; (ii) states, contrary to sound policy, that it need not conduct an “as efficient competitor” test, but conducts a misguided one anyway; (iii) insufficiently supports its speculative theory that the OEMs’ purchasing policy was influenced by their understanding of Intel’s alleged intention to reduce or eliminate their rebates should they buy x86 CPUs from AMD; (iv) fails to demonstrate its allegation that Intel’s rebates would harm competition and consumers; and (v) conducts an excessively restrictive analysis of the efficiencies created by Intel’s rebates.
A broader question that must be kept in mind when reading the Commission Decision is whether antitrust intervention was needed in a market characterized by increasing output, decreasing prices and sustained innovation. These characteristics alone should raise serious doubt about claims of anti-competitive foreclosure and consumer harm. They also question the Commission’s wisdom of investing large enforcement resources in what turned to be a long and protracted investigation.
The full paper can be downloaded here.
Posted in Analysis, CPU Market Competition, Discounting and Rebates, EC Case Against Intel, Economic Analysis, European Commission, Innovation and IP, Intel | No Comments »
Tuesday, October 13th, 2009
The Computer and Communications Industry Association (CCIA) published a summary of IBM’s dominance and why we should care. Some of the key points are:
- Over 80% of the world’s corporate and government data resides on mainframes.
- Almost 95% of Fortune 1000 companies use IBM’s Information Management System (IMS) for their most critical data management needs.
- In direct contravention of its previous licensing practices while it was still under the government consent decree, IBM refuses to allow third parties to supply mainframe computers.
- As a result, IBM owns over 99% of the installed base for IBM-compatible mainframes (IDC Research). IBM LEVERAGES ITS MONOPOLY
- Legacy data and applications that reside on mainframes are prohibitively expensive and technically challenging to move onto more modern computing platforms – causing customer lock-in.
- IBM has raised prices for mainframe solutions 10-15% annually over the last few years.
- Prices for mainframes, software and consulting services from IBM have remained higher than costs for other open platforms based on UNIX, Linux or Windows, which have fallen over the years. For example, the price for 1GB of mainframe memory is approximately $6,000 while the price for 1GB of memory for Intel or AMD- based servers running Linux or Windows is less than $100.
The full document is available on the CCIA site (PDF).
Posted in Analysis, DOJ Investigation of IBM Mainframes, IBM, US DOJ, mainframe market | No Comments »
Monday, September 21st, 2009
The Intel Corporation responded publicly to the publication of the European Commission’s non-confidential version of the decision against the company with a white paper on September 21, 2009. The white paper argues:
On May 13, 2009, the European Commission (“Commission”), announced its finding that Intel had violated Article 82 of the EC Treaty (“Decision”). Intel is convinced that the Commission, which serves as investigator, prosecutor and decision maker in European Community (“EC”) proceedings of this type, reached indefensible conclusions in its Decision – conclusions that are wrong as a matter of fact, law, economics, and elementary fairness. The Decision punishes innovation, risk-taking and strong price competition, and rewards failure. It seeks to take market competition out of the capable hands of the buyers and sellers that participate at every level of this market, and place it in the hands of European government regulators.
Most importantly, it essentially ignores the remarkable achievements that competition has produced in the microprocessor market over the past decade: dramatically lower prices, significantly greater output of product, and exponentially improved performance. It seeks to impose an artificial parity between Intel and its main competitor, AMD, in a market that, over and over again, has shown that it knows how to reward accomplishment, whether by Intel or AMD, and to punish failure, again regardless of which market participant failed.
Intel has exercised its right to appeal the Commission‟s Decision to an independent tribunal, the Court of First Instance of the European Community. The purpose of this paper is to address the accusations levelled at Intel in the redacted version of the EC‟s Decision which was recently made public. In doing so, we are hampered by the fact that much of the evidence Intel would like to rely on – documents and testimony of employees of AMD and the Original Equipment Manufacturers (“OEMs”) – remains subject to confidentiality protection and cannot be cited publicly. While the Commission has obtained waivers from the OEMs to make public much of the evidence it cited in the Decision, Intel is not in a position to insist that the OEMs waive confidentiality more broadly, to allow Intel to cite evidence that places the materials the Commission cited into context, proves that the accusations the Commission makes are unsupportable, and demonstrates that the market is highly competitive. As a result, at this juncture Intel‟s response to the Commission Decision must be general in nature.
However, one important OEM, Dell, which the Decision says was coerced by fear of Intel “punishment” to buy exclusively from Intel, has confirmed publicly that it always considered itself entirely free to choose to buy from AMD, without fear of reprisal or punishment. The record before the Commission contains sworn testimony of Dell executives that contradicts this essential premise of the Commission‟s case. The Decision nevertheless disregarded this evidence and instead relied on the speculation of a single lower level employee, who was not a decision maker and not even at Dell for much of the relevant period.
Dell‟s affirmation of its freedom to choose its suppliers, which undercuts the central premise of the Commission‟s case, serves as a caution that the Commission‟s one-sided depiction of the evidence will not withstand scrutiny. In this paper, we address the evidence that is publicly available and does not require the Commission‟s dispensation, or a breach of the confidentiality of a third party‟s information.
The Decision alleges that Intel implemented a strategy to foreclose AMD by engaging in two specific forms of anti-competitive conduct: (i) granting rebates1 to five original equipment manufacturers (“OEMs”) on condition that they purchase all, or almost all, of their x86 CPU requirements from Intel, and granting rebates to the German retailer, Media-Saturn- Holding GmbH (“MSH”), on condition that it only sold computers containing Intel‟s x86 CPUs; and (ii) imposing so-called “naked restrictions” upon three OEMs, by making payments to them to halt or delay the launch of, or limit the sales channels for, specific products containing AMD‟s x86 CPUs. These findings are not only factually wrong but also reflect a view of competition policy that would thwart the vigorous competition that sound antitrust policy should foster.
The full white paper can be downloaded here.
Posted in Analysis, CPU Market Competition, Discounting and Rebates, Due Process, EC Case Against Intel, Economic Analysis, European Commission, Innovation and IP, Intel, protectionism | No Comments »
Friday, May 15th, 2009
The president of the Consumer Electronics Association (CEA) Gary Shapiro wrote in the Huffington Post that European Commission’s record-setting fine was very unsettling. He wrote that:
I am sad to see one of America’s greatest technology companies saddled with a record-setting $1.4 billion fine,a payment which will simply fund the EU government and do nothing for consumers or competition. No consumer paid more for a computer for Intel’s success – indeed the evidence is they paid less and any legal violation is based on ill-defined antitrust laws where the line between aggressive competition and monopolization is blurry and subject to legal debate.
Americans should be asking their government to protest this outrageous fine, as any competitive disagreement between Intel and other American companies is more appropriately resolved in American courts.
The full article is available on the Huffington Post
Posted in Analysis, CPU Market Competition, EC Case Against Intel, European Commission, Innovation and IP, Intel, International Trade, US DOJ | No Comments »
Wednesday, March 4th, 2009
Roger Bowler, creator of the Hercules open source mainframe emulator project, outlined his concerns about IBM’s actions towards competitors in the mainframe market.
In my mind there are three major issues here:
- The IBM mainframe is a unique platform that is incredibly important for enterprise computing.
- Through its actions, IBM has prevented alternative mainframe solutions from being viable and as a result it now controls 100% of the mainframe market.
- With no competition in the mainframe platform market, prices have remained high and customers have fewer choices than if there were more vendors creating and selling alternative solutions.
He summarized:
I strongly believe that there needs to be fair and open competition in the mainframe market. Customers should have the ability to choose platforms that meet their needs not the needs of a single vendor. I believe Hercules users and others should be able to legally run mainframe applications on non-IBM platforms. I’m not asking IBM to give away its software or intellectual property. I simply want mainframe users to be able to license IBM’s software on reasonable terms for use on non-IBM mainframes. If this were to happen, I actually believe that the mainframe market would expand and IBM would benefit through greater adoption of mainframe technologies. With fair competition in the mainframe space, mainframe users and consumers would also benefit as the cost of mainframe computing would likely come down to prices closer to distributed servers. Opening up the mainframe market would be a win-win for all and have huge benefits for customers who rely on mainframe applications. With no competition in the mainframe platform market, prices have remained high and customers have fewer choices than if there were more vendors creating and selling alternative solutions.
The full article is available on OpenMainframe.org.
Posted in Analysis, DOJ Investigation of IBM Mainframes, EC Investigation of IBM Mainframe Tying, European Commission, IBM, US DOJ, Uncategorized, mainframe market | No Comments »
Tuesday, January 20th, 2009
Peerstone Research examined the economic costs to Europe of IBM’s mainframe monopoly. Peerstone found that “Mainframe hardware competition could save Europe $48 billion over 20 years.”
We compared the costs of current IBM mainframe hardware systems to the costs of high-end servers based on modern Intel or AMD microprocessors capable of running high-value business applications at equivalent performance levels. We found that:
The introduction of a fully competitive market for mainframe hardware would save European mainframe customers $48 billion over the anticipated 20 year remaining lifespan of current mainframe applications.
These savings would result from the decline of current monopoly mainframe hardware prices to the level of prices for standard non-mainframe servers of equivalent performance (e.g. high-end servers from leading vendors such as HP, Sun or IBM itself using modern Intel or AMD microprocessors and running modern operating systems such as Linux, Unix or Windows Server).
We found that such industry standard servers would be capable of running existing high-value “legacy” mainframe applications with the same performance as IBM mainframes but at a small fraction of the cost (typically less than 10% and in some cases less than 5%).
We further found that IBM sells its own mainframe hardware at similar dramatically lower prices to a restricted subset of customers who wish to run only new Linux or Java applications, but deliberately disables these discounted mainframe processors in order to prevent them from running “legacy” mainframe applications.
Mainframe software competition could bring total European savings to $100 billion
Since prices for essential mainframe software such as operating systems and middleware are typically far higher than prices for equivalent software running on industry standard servers, we sought to determine how much Europeans would save if prices for mainframe software were allowed to fall to competitive market levels. We found that:
A fully competitive market for mainframe software would result in additional savings to European mainframe customers of roughly $50 billion over 20 years.
The total savings to Europe from a fully competitive market for mainframe hardware and software would be on the order of $100 billion over 20 years.
THe summary of the paper is available at OpenMainframe.org
THe full paper is available here.
Posted in Analysis, DOJ Investigation of IBM Mainframes, EC Investigation of IBM Mainframe Tying, European Commission, IBM, US DOJ, mainframe market | No Comments »
