AMD vs Intel - Anti Competitive Behaviour or Competitive Advantage - Case Study Example

? Analysis of AMD Vs Intel Case of 2005 Overview of AMD Intel Competition Case Advanced Micro Devices, Inc. (AMD) is headquartered in California, United States. The organization is one of the largest manufacturers of computer processors and targets both the markets of commercial and consumer. In CPU market, there has always been a significant rivalry between AMD and Intel. This competition between two large business entities brought many issues in public view, and AMD’s lawsuit against Intel is most popular. The history of litigation between Intel and AMD is old enough as first conflict appeared in 1986. But here the 2005’s lawsuit filed by AMD against Intel is significant to discus. In its law suit, AMD appeared claiming that Intel is intending to have an unfair competition in the computer product market. It further alleged that Intel has been offering rebates to Japanese manufacturers of Personal Computers. Due to the offered rebates to PC manufacturers, the manufacturers agreed not to purchase the Pc products of AMD (Hitt et al., 2009, pp. 41-50). In 2005, the allegations were made by AMD in a way that Intel was pressuring the computer manufacturers by offering them money to boycott the products of AMD. Therefore, in such situation Intel seems to break the laws of national and international competition. As the purpose of competition, law is to promote and sustain the business competition in a market where profit organizations regulate the anti-competitive law (Malik, 2005). Thus, if those terms and conditions that fall under such laws are broken, Intel deserves to be charged with fine. Intel was alleged that they have been using illegal ways to achieve competitive advantages though they offered a bribe to Japanese multinational organizations of Hitachi and Fujitsu. Moreover, according to the allegations made by AMD, NEC, Toshiba and Sony were also offered money by Intel. That was not the only issue surrounded by the lawsuit; Intel was also alleged to pay German retailers only for selling those PC products that are made by Intel (Delta & Matsuura, 2008, pp. 4-48). AMD further alleged that Intel had also tried to exclude AMD from market by dealing with Gateway, Sony and Toshiba exclusively. While carrying those deals, Intel included subsidies, cash payments and most importantly, discriminatory pricing. The actual issue raised by AMD pointed out that Intel was inclined to maintain a monopoly in PC product market, and in order to do so, Intel was violating the competition laws. Throughout the world, the antitrust laws are explained clearly (Spooner & Burt, 2005). The sole purpose of such laws is to restrain the business organizations from doing abusive conduct for being dominant in a competition. Therefore, by considering the clauses of the law, AMD found its position secured in suing Intel. On the other hand, Intel defended itself by pointing out that AMD’s market failure cannot be used to blame Intel. In Japan during 2005, District Court considered the appeal of AMD that Intel was going against the antimonopoly laws of Japan. However, this situation did not mean that Intel gave up on the first hearing because they also presented strong arguments to sustain their legal position (Hill et al., 2009, pp. 170-190). Intel’s Behavior and Theoretical Perspective of Case As According to AMD, Intel tried to maintain it monopoly in PC market, by excluding AMD through illegal tactics; therefore, the case falls under the laws of competition laws that is to be assessed accordingly. There are many of the reasons, which make the behavior of Intel anti competitive, including its money offerings to retailers to sell its products. Therefore, in this situation case is supposed to be dealt under Section 2 of the Sherman Act (Ante et al., 2005). There is no doubt that Intel’s behavior in selling its products goes against the antitrust laws in America. However, still there is a need to determine the situation on theoretical perspective. Therefore, in order to find whether the behavior of Intel was competitive or anticompetitive, Dr. Bernheim discussed some useful methods in which he enforced that when the case is determined, there is no need to compare the price and costs offered by Intel to its customers for selling its products (Epstein & Greve, 2004). Additionally, when such cases are dealt, there is always a need to measure the anti competitive behavior of the organization with the precompetitive behavior. The case of AMD Intel competition 2005 surrounded the behavior of Intel Corp. as Intel ran its worldwide campaign to force its consumers not to purchase AMD’s products. The case also points out the behavior of Intel by threatening the consumers with retaliation. According to economic experts, Intel’s act towards maintaining its monopoly in the market is illegal if it retaliates and offers money to retailers for not selling AMD’s PC. Apparently, allegations on Intel seems to be right because there are no authentic and convincing evidences are presented by Intel Corp, but in the coming future, they can be expected (Agusti et al., 2008). When antitrust authorities started to measure the considered case, Intel’s behavior to them was completely violating the antitrust laws. European commission while dealing this case pointed out that PC market possessed no choice, but to accept the offer of Intel as this market largely depends on Intel in microprocessors products. As the microchip market was completely occupied by Intel, AMD therefore had to sell its products even from below cost. Of course, the situation was one of the big losses of AMD because the company also had to offer free chips to its customers, and sometimes it paid money to its customers to use them (Callahan, 2005). Thus, it appears evident that the market situation in PC market has a monopoly not a competition as Intel had tied hard and paid well to retailers and customers to restrain from AMD’s products. This is another side of Intel’s behavior that it had never accepted the allegation over them. In 2005’s antitrust case, Intel was fined with $1.25 billion to pay AMD. In order to settle this long dispute, Intel is now agreed to pay the fine of $1.25 billion. If the corporation of Intel did not do unethical and legal act to maintain its monopoly in market, it would have never been agreed to pay fine. Therefore, by assessing the allegations made by AMD, it can be said that Intel was violating the antitrust laws by its illegal penetration in PC market (Cheng et al., 1995). Position Held by Intel When the considered case of AMD Intel competition is thoroughly gone through, Intel can be found breaking the laws of antitrust. As such laws stresses on the prohibition of those practices and agreements that may hinder the ways of competition between business organizations, Intel is therefore found not holding favorable conditions in terms of its legal position. The laws also supervise the acquisitions and mergers between the large organizations because the competition can be violated by wrong activities of the organizations. On the other hand, the response of Intel after being alleged by AMD appeared accusing AMD in a way that, AMD’s reputation in market has never been safe because most of the customers consider AMD as one of the unreliable supplier in PC manufacturing industry (Hull, 2005, pp. 34-70; Hesseldahl, 2005). The arguments put forwarded in the defense of Intel were quite reasonable, but again the fact was still safe there that Intel utilized illegal ways to hinder the penetration in PC market for AMD. One of their hearings, Intel argued that AMD cannot blame Intel for its failure in marketplace, as AMD’s reputation for delaying supplies was always there. Intel further argued that whenever AMD made its delivery on time, it obviously gained some market shares. The delivery schedule of AMD is completely on its hands which determines the market share of the organization. Therefore, according to Intel, AMD’s market share is to be studied in order to understand its reputation as supplier (Cross & Miller, 2011, pp. 12-67; Electronics Weekly, 2005). Intel defended itself in a way that if the past thirty years of Intel are observed, its on time delivery and economical rates to consumers have served him with great profit. By utilizing such benefits, Intel initiated to set up its research and development along with investing its capital in new capacity, certainly during those times when the market of semiconductor suffered downturns (Popovich, 1999; Bulik, 2005). While defending itself, Intel wrote that AMD’s colorful language and claims cannot influence the goals of Intel’s position in price competition. In short, by analyzing the arguments of Intel, it can be observed that Intel meant to prove AMD stupid as a player in market due its poor supply related operations (Fugate & Simowitz, 1996, pp. 42-45; Taylor, 2007). Furthermore, when the case was dealt by European Commission, Intel disagreed with its decision and argued that the decision was completely predisposal as investigations done by EC were to change the results of competition. In other words, EC did its investigations not for finding the facts within the case, but just to confirm its viewpoint (Gomes, 2003). While doing it, EC ignored some of those evidences that were significant to be considered for handling this case in unbiased manners. Additionally, Intel also argued that it had offered its products at discounted rates, not on below cost. Therefore, antitrust policy cannot punish or even discourage the business strategy of Intel Corp. (Miller & Jentz, 2010, pp. 67-74; MarketWatch, 2005). Evaluation of the Case When the cases with the laws involved are assessed, neutral perspective is supposed to be there to evaluate the actual situation. Before analyzing the competition or monopoly between these two organizations, it is very significant to consider the economical position of Intel as from 1996-2006 Intel remained successful in earning more than $60 billion. This figure only indicates the monopoly profits gained by this organization, which demonstrates it one of the smart players in the market of technology. The case is complex from various perspectives because both of the parties of Intel and AMD were holding some feeble arguments (Bay et al., 2004; Faletra, 2007). When the case is studied it can be observed that Intel has always held an edge in PC market, which is due to its better supply sand innovative products. It is obvious that allegations on Intel cannot be ignored, in which Intel was found using abusive and illegal ways to gain the competitive advantage. By considering the present situation of the PC product market, it is located that Intel has been successful in maintaining its monopoly in computer product markets, which was attained by threatening the retailers not to purchase the products of AMD (Jennings, 2010, pp. 21-55; Williams & Bucken, 2006). Besides the facts against Intel, the poor performance of AMD in the PC market cannot be denied as this business entity never showed well-organized manners when it came to its supply chain management. The arguments presented by Intel in its defense held true content in them (Hesseldahl, 2008). Any business organization that wants to lead a specific market must focus on its quality maintenance and price structure; similarly in this case, Intel is inclined to maintain its market position through applying the business tactics to maintain its position. The difference between the product quality and punctuality in supply of these entities of AMD and Intel is also evident as Intel has always been dealt as favorite by the major consumers of microprocessors (Responding to Imitation: Intel vs. AMD in 1991, 2008). By considering an allegation that Intel sold its products below cost, it has been analyzed that the reason of increasing sale of Intel was not the below cost rates of its products as Intel offered discounts to its customers. Therefore, it can be said that if Intel competes in the PC market with discounted rates, there is no illegal or unethical act that may harm the legal position of Intel Corp.; moreover, it is also observed that when discounts were offered by Intel in the form of rebates, there was no condition like not to purchase the product of AMD or customer would have to buy all its microprocessors from Intel. By concluding the case, many of the factors are found making this case complicated to be resolved, but still Intel with its dominant market position stands stronger in its arguments (Mears, 2005). References Agusti, F. et al., 2008. International Business Law and Its Environment. 7 ed. New York: Cengage Learning. Ante, S., Edwards, C., Rowley, I. & Reinhardt, A., 2005. AMD Hauls Intel Back to Court. BusinessWeek Online. Bay, M., Brown, D. C. & Maske, C., 2004. Intel Corp. v. Advanced Micro Devices, Inc.: Complainants Before Foreign Antitrust Agencies Get Access to U.S. Discovery. Venulex Legal Summaries, pp. 1-4. Bulik, B. S., 2005. AMD chips away at image of rival Intel. Advertising Age, 76(4), pp. 4-56. Callahan, S., 2005. AMD chips away at Intel. B to B, 90(9), pp. 3-32. Channel Insider, 2009. AMD Market Share Leaps Forward, Intel Maintains Dominance.. Channel Insider, pp. 1-1. Cheng, J. et al., 1995. International Harmonization of Competition Laws. illustrated ed. Netherlands: Martinus Nijhoff Publishers. Cross, F. B. & Miller, R. L., 2011. The Legal Environment of Business: Text and Cases: Ethical, Regulatory, Global, and Corporate Issues. 8 ed. New York: Cengage Learning. Delta, G. B. & Matsuura, J. H., 2008. Law of the Internet, Volume 2. 3 ed. New York: Aspen Publishers Online. Electronics Weekly, 2005. Intel brands AMD lawsuit as 'factually incorrect. Electronics Weekly, 9 7, pp. 3-3. Epstein, R. A. & Greve, M. S., 2004. Competition Laws in Conflict: Antitrust Jurisdiction in the Global Economy. illustrated ed. Washington: American Enterprise Institute. Faletra, R., 2007. Battle Between Intel And AMD Heats Up. CRN, Issue 1249, pp. 72-72. Fugate, W. L. & Simowitz, L. H., 1996. Foreign Commerce and the Antitrust Laws, Volume 1. 5 ed. New York: Aspen Publishers Online. Gomes, L., 2003. Intel Turns to a Stunt As Challenger AMD Beats It to the Market. Wall Street Journal , 242(63), pp. 1-1. Hesseldahl, A., 2005. AMD to Intel: Let's Rumble. BusinessWeek Online, 23 8. Hesseldahl, A., 2008. AMD vs. Intel: The Challenger's New Plan. BusinessWeek Online, 1(1), pp. 20-20. Hill, C., Jones, G. & Jones, G. R., 2009. Strategic Management Theory: An Integrated Approach. 9 ed. s.l.:Cengage Learning. Hitt, M. A. et al., 2009. Strategic Management: Competitiveness and Globalization : Cases. 8 ed. New York: Cengage Learning. Hull, G., 2005. The Abolition of Antitrust. 2 ed. New Jersey: Transaction Publishers. Jennings, M. M., 2010. Business: Its Legal, Ethical, and Global Environment. 9 ed. New York: Cengage Learning. Malik, O., 2005. Why AMD Still Doesn't Scare Intel. Business 2.0, 6(8), pp. 72-73. MarketWatch, 2005. AMD sues Intel for antitrust violations.. MarketWatch, 4(8), pp. 186-188. Mears, J., 2005. The ABC's of AMD vs. Intel. Network World, 22(27), pp. 21-21. Miller, R. L. & Jentz, G. A., 2010. Business Law Today: The Essentials. 9 ed. Washington: Cengage Learning. Popovich, K., 1999. AMD pressures Intel in high-end PCs. PC Week, 16(49), p. 52. Responding to Imitation: Intel vs. AMD in 1991 (2008) Yao, Dennis. Spooner, J. & Burt, J., 2005. AMD slams Intel with suit. eWeek, 22(27), pp. 31-31. Taylor, C., 2007. AMD wins 2006 revenue battle with Intel, iSuppli says. Electronic News, 53(12), pp. 34-34. Williams, M. & Bucken, M., 2006. AMD, Intel Spar Over Court Ruling in Japan. Computerworld, 40 (1), pp. 12-12. Read More