Market competition is the key concept that enables fair operation of companies of any size producing similar products or offering the same services. It is beneficial not only for smaller enterprises that otherwise would not be able to survive in the industry but also for the customers who have a broader choice of options. In this case, Intel company attempted to make HP company buy their commodities (chips) instead of purchasing the competitor’s (AMD) ones. Loyalty payment was made to HP to set this agreement. However, AMD sued Intel under the antitrust laws, leading to Intel settling the case by paying $1.25 billion to AMD. This work will examine the conflict in this case to reveal the incentive for the decision and what act’s regulations and advice were ignored.
There are regulations applied to this case, which service the basis for AMD suing Intel. Based on the antitrust laws, businesses practices intended to form relationships restricting trade, attempt monopolization, fix prices, divide markets, or rig bids are considered violations of the Sherman Act, and therefore, are illegal (Federal Trade Commission, 2017). This act prohibits restraints of trade considered unreasonable, such as a contract between two individuals. Moreover, there is the Clayton Act that addresses specific practices, including acquisitions intended to lessen competition or to create a monopoly, which is ground under this case. The conflict arose from attempting to benefit from an illegal agreement in this situation.
The wrong decision was made by Intel, who, while being aware of the Sherman Act and the Antitrust Laws, tried to manipulate their potential buyer’s decision restricting their close competitor from participating in commodities offering and selling (Federal Trade Commission, 2017). The information Intel had was complete and clear, making it evident that the violation of the Sherman Act was done intentionally. The incentive for Intel to attempt such bribery was a desire to outperform their competitor (AMD) and gain financial benefit.
By this loyalty payment, a competitive injury occurred in the secondary line, which implies “when favored customers of a supplier are given a price advantage over competing customers” (Federal Trade Commission, 2017, para. 4). Intel violated Robinson-Patman Act by ignoring its advice either not to manipulate prices or not favoring customers to maintain fair competition on the market. Intel attempted to make a company that purchases chips to buy mostly Intel’s commodities by loyalty payment that is considered a bribe and the injury to competition.
Reference
Federal Trade Commission. (2017). Price discrimination: Robinson-Patman Violations. Federal Trade Commission. FTC.gov.