On November 12, 2009, Intel Corp. gave Advanced Micro<\/p>\n
Devices (AMD) $1.25 billion to settle a lawsuit AMD<\/p>\n
filed against it in 2005. Intel\u2019s CEO Paul Otellini said<\/p>\n
he agreed to pay $1.25 billion to settle AMD\u2019s lawsuit<\/p>\n
because he no longer felt the \u201ctime and money [spent<\/p>\n
fighting it] makes sense.\u201d 1 AMD\u2019s lawsuit accused Intel<\/p>\n
of being a monopoly and of using its monopoly power to<\/p>\n
unfairly keep computer companies from buying AMD\u2019s<\/p>\n
microprocessors. With about 70 percent of the market,<\/p>\n
Intel Corp. is the world\u2019s largest manufacturer of personal<\/p>\n
computer (PC) \u201cmicroprocessors\u201d\u2014also called<\/p>\n
\u201ccomputer chips,\u201d \u201cmicrochips,\u201d or \u201cprocessors\u201d\u2014tiny<\/p>\n
electronic devices that serve as the \u201cbrain\u201d of a personal<\/p>\n
computer and carries out its basic operations. As<\/p>\n
the world\u2019s second largest maker of PC microprocessors,<\/p>\n
AMD is Intel\u2019s only real competitor, although it<\/p>\n
holds only about 20 percent of the PC processor market.<\/p>\n
It is difficult for other companies to get into the<\/p>\n
business of making PC microprocessors because of<\/p>\n
several \u201cbarriers to entry.\u201d First, Intel and AMD hold<\/p>\n
the patents for making the kind of microprocessors<\/p>\n
almost all personal computers use. Second, it costs several<\/p>\n
billion dollars to build facilities for making microprocessors.<\/p>\n
Third, Intel and AMD are so big and experienced<\/p>\n
that they can now make microprocessors for a lot less<\/p>\n
than a new company could, so if a new company tried to<\/p>\n
enter the market its prices would likely not be competitive<\/p>\n
with Intel\u2019s or AMD\u2019s.<\/p>\n
AMD was not the only one that had accused Intel of<\/p>\n
using monopoly power to stifle competition. On May 5,<\/p>\n
2009, the European Commission fined Intel a record $1.5<\/p>\n
billion and said the company had used its monopoly power<\/p>\n
to unfairly block AMD from the market. On November 4,<\/p>\n
2009, New York Attorney General Andrew Cuomo sued<\/p>\n
Intel for harming New York\u2019s consumers by using its monopoly<\/p>\n
power to keep computer makers from buying better<\/p>\n
AMD microprocessors. In June, 2008, South Korea\u2019s<\/p>\n
Fair Trade Commission ruled that Intel had used its monopoly<\/p>\n
power in violation of its antitrust laws. In 2005, Japan\u2019s<\/p>\n
Fair Trade Commission ruled that Intel had violated<\/p>\n
Japanese antitrust laws by paying companies to buy all or<\/p>\n
almost all of their processors exclusively from Intel.<\/p>\n
230 THE MARKET AND BUSINESS<\/p>\n
Explore the Concept on<\/p>\n
mythinkinglab.com<\/p>\n
ETHICS IN THE MARKETPLACE 231<\/p>\n
Many of the activities Intel was being blamed for<\/p>\n
originated in a strategic mistake the company made in<\/p>\n
the late 1990s when it invested hundreds of millions of<\/p>\n
dollars developing a new type of microprocessor that<\/p>\n
would not use \u201cx86 technology.\u201d x86 technology consists<\/p>\n
of certain instructions that are built into so-called<\/p>\n
\u201cx86 microprocessors.\u201d All microprocessors must contain<\/p>\n
\u201cinstructions\u201d that allow them to \u201cread\u201d and run software<\/p>\n
programs like games, word-processors, or web browsers.<\/p>\n
Because all x86 microprocessors contain the same<\/p>\n
instructions, the newest x86 microprocessors can generally<\/p>\n
read and use the same data and programs that ran on<\/p>\n
older x86 microprocessors. This means that when a customer<\/p>\n
who has been using a computer with an x86 processor<\/p>\n
buys a new computer with a more advanced x86<\/p>\n
microprocessor, he or she does not have to throw away<\/p>\n
all his or her old programs and data because they will still<\/p>\n
work on the new computer.<\/p>\n
This ability of each new generation of x86 microprocessors<\/p>\n
to run most of the programs that previous<\/p>\n
generations of x86 microprocessors could run is a major<\/p>\n
advantage for both consumers and businesses alike.<\/p>\n
However, from Intel\u2019s perspective, x86 microprocessors<\/p>\n
have a major disadvantage: AMD can legally make x86<\/p>\n
microprocessors so Intel is forced to compete with AMD.<\/p>\n
Intel\u2019s biggest nightmare was that AMD someday might<\/p>\n
come up with an x86 microprocessor that was faster and<\/p>\n
more powerful than any of Intel\u2019s and then take over the<\/p>\n
market.<\/p>\n
So when it invested in a new generation of microprocessors<\/p>\n
in the 1990s, Intel decided to develop and patent<\/p>\n
a microprocessor that did not use x86 technology. Since<\/p>\n
Intel alone would hold the patent for this new non-x86<\/p>\n
processor, AMD would be legally barred from making it.<\/p>\n
With luck, Intel might eventually have the entire pc processor<\/p>\n
market to itself.<\/p>\n
Intel called its new pc processor the \u201cItanium\u201d and it<\/p>\n
was faster and more powerful than all previous generations<\/p>\n
of pc processors, but there was a problem. Since the Itanium<\/p>\n
processor did not use x86 technology, all software<\/p>\n
designed to run on current and older x86 processors would<\/p>\n
not work on the new Itanium unless the user first ran an<\/p>\n
\u201cemulation\u201d program that, in effect, forced the Itanium<\/p>\n
to imitate an x86 processor. But the emulation program<\/p>\n
slowed down the programs designed for x86 processors,<\/p>\n
sometimes to a frustrating crawl. This meant that when a<\/p>\n
consumer or business bought a new computer with the Itanium<\/p>\n
processor inside, its current software and data would<\/p>\n
not work at all well on the new computer. This was a major<\/p>\n
deterrent for buyers.<\/p>\n
AMD had also developed a more advanced generation<\/p>\n
of PC processors during the 1990s. But AMD decided<\/p>\n
to stick with the x86 technology so its new processor<\/p>\n
could run software designed for x86 processors without<\/p>\n
using an emulation program. AMD called its new processor<\/p>\n
the Athlon. Since the Athlon was not slowed down by<\/p>\n
an emulation program when it ran x86 programs, all x86<\/p>\n
programs ran extremely fast and smoothly on computers<\/p>\n
equipped with AMD\u2019s new processor. Not only could<\/p>\n
AMD\u2019s Athlon run x86 programs much faster and better<\/p>\n
than Intel\u2019s Itanium, it also used less electricity and AMD<\/p>\n
sold it for less than the Itanium. Intel\u2019s worse nightmare<\/p>\n
had come true.<\/p>\n
When AMD and Intel marketed their new microprocessors<\/p>\n
in 1999, reviewers and users raved about AMD\u2019s<\/p>\n
fast and low-priced Athlon and heaped scorn on Intel\u2019s<\/p>\n
clunky Itanium. PC manufacturers flocked to put AMD\u2019s<\/p>\n
processor into their new computers and AMD\u2019s market<\/p>\n
share grew from about 9 percent to about 25 percent of<\/p>\n
the PC processor market, while Intel\u2019s fell from 90 percent<\/p>\n
to 74 percent.<\/p>\n
But in 2003 and 2004, AMD\u2019s sales hit a wall. Computer<\/p>\n
manufacturers suddenly refused to buy AMD\u2019s<\/p>\n
processors. In 2002, Sony had put AMD\u2019s Athlon into<\/p>\n
23 percent of its computers; by 2004 it had stopped<\/p>\n
using the Athlon completely. NEC went from using the<\/p>\n
Athlon in 84 percent of its desktop computers, to using<\/p>\n
it in virtually none. Toshiba went from using it in<\/p>\n
15 percent of its computers in 2000, to using it in none<\/p>\n
by 2001. 2 Altogether, AMD\u2019s share of the Japanese PC<\/p>\n
processor market fell from 25 percent in 2002 to 9 percent<\/p>\n
in 2004.<\/p>\n
What had happened? Tom McCoy, AMD\u2019s executive<\/p>\n
vice president for legal affairs, claimed in an article that<\/p>\n
the drop in orders for Athlon chips was \u201ca matter of sheer<\/p>\n
exercise of monopoly power\u201d by Intel. 3 McCoy claimed<\/p>\n
that Intel paid the Japanese companies\u2014Sony, NEC, and<\/p>\n
Toshiba\u2014millions of dollars in \u201crebates\u201d provided they<\/p>\n
stopped buying AMD\u2019s microprocessors and used only<\/p>\n
Intel microprocessors inside their computers. But these<\/p>\n
payments, McCoy claimed, were not really rebates. A true<\/p>\n
rebate is a payment based on the number of products a<\/p>\n
customer purchases, and so are in effect discounts that are<\/p>\n
paid after the customer buys the product, unlike regular<\/p>\n
discounts which are subtracted from the price before the<\/p>\n
purchase. But the payments Intel was giving computer<\/p>\n
makers, McCoy asserted, were not related to the number<\/p>\n
of processors they bought. Instead, Intel handed over<\/p>\n
these payments when a company agreed to stop buying<\/p>\n
from AMD, regardless of the number of processors they<\/p>\n
subsequently purchased.<\/p>\n
Moreover, McCoy wrote, Intel threatened companies<\/p>\n
by warning them that if they did not stop using<\/p>\n
AMD\u2019s microprocessors, Intel might stop supplying<\/p>\n
them with any microprocessors at all. The threat was<\/p>\n
a powerful one because even if they used AMD\u2019s microprocessors<\/p>\n
on some of their top-quality computers,<\/p>\n
every computer manufacturer still depended on Intel<\/p>\n
232 THE MARKET AND BUSINESS<\/p>\n
for the microprocessors in all their other computers. 4<\/p>\n
Because of its small size, AMD could not provide the<\/p>\n
full range of microprocessors that the larger companies<\/p>\n
needed.<\/p>\n
Convinced that Intel was using unfair and illegal<\/p>\n
means to block them out of the market, AMD sued Intel<\/p>\n
on June 27, 2005. Intel\u2019s general legal counsel, Bruce<\/p>\n
Sewell, responded to AMD\u2019s claims by arguing that the<\/p>\n
reason computer makers stopped buying AMD\u2019s microchips<\/p>\n
was because once they started using them in large<\/p>\n
numbers and running many different programs on them,<\/p>\n
they found AMD chips did not run the programs as fast as<\/p>\n
they had first appeared to. \u201cWhen AMD has good parts,<\/p>\n
they do fine,\u201d said Bruce Sewell, \u201cWhen AMD has lousy<\/p>\n
parts, they don\u2019t do so well. That\u2019s what a competitive<\/p>\n
market is all about.\u201d<\/p>\n
Bruce Sewell also defended Intel\u2019s rebates. If it is not<\/p>\n
wrong, he said, for a small company to build loyal customers<\/p>\n
by giving them more rebates when they agree to<\/p>\n
use your products exclusively, why should it be wrong for<\/p>\n
a larger company to do the same? Moreover, rebates in<\/p>\n
effect lowered the price of its computer chips and what<\/p>\n
was wrong with that? Ultimately, didn\u2019t that benefit the<\/p>\n
consumer? And why was it so important to relate rebates<\/p>\n
to the number of units a customer buys? If Intel gave<\/p>\n
larger rebates to those companies that agreed to use its<\/p>\n
products exclusively, and smaller rebates to those companies<\/p>\n
that would not make the same commitment, what<\/p>\n
was wrong with that? Wasn\u2019t a company\u2019s agreement to<\/p>\n
use Intel as its exclusive supplier valuable to Intel and<\/p>\n
so shouldn\u2019t Intel be allowed to reward that company<\/p>\n
with larger rebates than the discounts it offered other<\/p>\n
companies?<\/p>\n
Because the AMD lawsuit was complicated and<\/p>\n
required gathering and reviewing a great deal of documentary<\/p>\n
evidence, it had still not gone to trial by the<\/p>\n
end of 2009. By then, however, AMD\u2019s allegations had<\/p>\n
convinced several foreign governments\u2014including the<\/p>\n
European Union, South Korea, and Japan\u2014that they<\/p>\n
should investigate Intel and their investigations ended<\/p>\n
with substantial fines of Intel for violating antitrust laws.<\/p>\n
The United States, however, did very little until, toward<\/p>\n
the end of 2009, the U.S. Federal Trade Commission<\/p>\n
(FTC) sued Intel for \u201cillegal monopolization,\u201d \u201cunfair<\/p>\n
methods of competition,\u201d and \u201cdeceptive acts and practices<\/p>\n
in commerce.\u201d 5<\/p>\n
The FTC said in its suit that its investigations<\/p>\n
had discovered what Intel\u2019s legal counsel Bruce Sewell<\/p>\n
had suggested: some software programs ran slowly on<\/p>\n
AMD\u2019s processors. But the reason was not because<\/p>\n
AMD\u2019s processors were inherently slow. They had<\/p>\n
found that Intel had changed the programs sold by software<\/p>\n
companies so that their programs would not work<\/p>\n
well on computers using AMD\u2019s computer chips. All<\/p>\n
software companies use \u201ccompilers\u201d to convert their<\/p>\n
programs into a form that will run on particular kinds<\/p>\n
of computer chips. The compilers are provided by the<\/p>\n
companies that make the chips, in this case Intel and<\/p>\n
AMD, who are each supposed to provide compilers that<\/p>\n
will allow programs to run on both their processors. But<\/p>\n
in 2003, the FTC said, Intel changed its compilers so<\/p>\n
that programs compiled with Intel\u2019s compilers would<\/p>\n
run fine on Intel processors, but would run slowly or<\/p>\n
poorly on AMD\u2019s. Without their knowledge, when software<\/p>\n
companies used Intel\u2019s compilers to process one of<\/p>\n
their programs, Intel\u2019s compiler secretly inserted bugs<\/p>\n
into the program that slowed it when it ran on an AMD<\/p>\n
processor, but not on an Intel processor. Customers<\/p>\n
and reviewers blamed AMD\u2019s processor when their new<\/p>\n
programs did not run well on a computer that had an<\/p>\n
AMD chip inside. 6<\/p>\n
The FTC also claimed that Intel had provided software<\/p>\n
companies with \u201clibraries\u201d of software code that<\/p>\n
were also designed to trip up programs when they ran<\/p>\n
on AMD microchips. The software code the FTC was<\/p>\n
talking about were short bits of software that carry out<\/p>\n
certain frequently used, but routine operations on x-86<\/p>\n
processors. Software engineers insert these short bits<\/p>\n
of code into their programs instead of writing them out<\/p>\n
each time they need them. Intel provided software engineers<\/p>\n
with \u201clibraries\u201d consisting of dozens of these bits<\/p>\n
of code. However, the FTC claimed, Intel changed the<\/p>\n
software codes in its library so they would not work well<\/p>\n
on AMD processors. Consumers and reviewers again<\/p>\n
blamed AMD\u2019s chips when a program containing Intel\u2019s<\/p>\n
codes did not run well on a computer that used an AMD<\/p>\n
microchips. 7<\/p>\n
The FTC also said that Intel had paid computer makers<\/p>\n
to boycott AMD\u2019s processors by giving them what Intel<\/p>\n
called \u201crebates\u201d although these payments required only<\/p>\n
that a company agree not to buy AMD processors and<\/p>\n
were unrelated to the amount the company bought. The<\/p>\n
computer manufacturer Dell, Inc., was a good example of<\/p>\n
how Intel paid computer makers to boycott AMD. Intel<\/p>\n
had began making significant quarterly \u201crebates\u201d to computer<\/p>\n
manufacturer Dell, Inc. in 2001, and Dell at that<\/p>\n
time stopped using AMD\u2019s processors even though many<\/p>\n
of its customers said they wanted computers with AMD\u2019s<\/p>\n
processor.<\/p>\n
Dell, which was founded in 1984 by its current CEO,<\/p>\n
Michael Dell, who was then a student at the University of<\/p>\n
Texas at Austin, began when he started selling computers<\/p>\n
out of his dorm room. By 2001, Dell had become the<\/p>\n
largest PC manufacturer in the world and held 13 percent<\/p>\n
of the worldwide PC market. The company finished 2001<\/p>\n
with a net income of $2.24 billion, its largest so far.<\/p>\n
In 2002, according to a Dell memo, Dell\u2019s chief operating<\/p>\n
officer (COO) met with several Intel officials. Before<\/p>\n
ETHICS IN THE MARKETPLACE 233<\/p>\n
the meeting, Dell\u2019s lead negotiator had explained what he<\/p>\n
expected Intel\u2019s officials would say to Dell\u2019s COO: \u201cwithout<\/p>\n
being blatant [Intel] will make it clear that Dell won\u2019t<\/p>\n
get more [payments] if we do [use] AMD [processors].<\/p>\n
We\u2019ll get less and someone else will get ours.\u201d 8 During the<\/p>\n
meeting Intel officials said they were willing to do \u201cwhatever<\/p>\n
it takes\u201d to get Dell not to use any AMD processors<\/p>\n
in its computers. According to the memo, Intel agreed at<\/p>\n
the meeting that its quarterly payments to Dell \u201cshould<\/p>\n
increase from the $70 million this quarter to $100 million.\u201d<\/p>\n
9 But Dell had to continue to refuse to use AMD\u2019s<\/p>\n
processors. 10<\/p>\n
It was not difficult for Intel to pay the hundreds of<\/p>\n
millions of dollars it was giving Dell. Intel had unusually<\/p>\n
high profit margins of 50 percent that allowed it<\/p>\n
to accumulate $10.3 billion of cash at the end of 2001,<\/p>\n
and by the end of 2005 it held $14.8 billion of cash. In a<\/p>\n
February, 2004 email, Michael Dell remarked on Intel\u2019s<\/p>\n
profitability:<\/p>\n
[Intel\u2019s] profits in the 2nd half of 2001 were<\/p>\n
$1.397 billion on revenues of $13.528 billion.<\/p>\n
In the 2nd half of 2003 they were $4.885 billion<\/p>\n
on revenues of $16.574 billion. In other words<\/p>\n
their sales went up 22.5% and their profits went<\/p>\n
up 350%! Or said another way, their revenues<\/p>\n
went up $3.046 billion and their profits went<\/p>\n
up $3,488 billion!! Not even Microsoft can do<\/p>\n
that. 11<\/p>\n
Although many smaller companies started using<\/p>\n
AMD\u2019s chips, Dell feared retaliation from Intel if it<\/p>\n
tried to do the same. In an email, a Dell executive noted<\/p>\n
that if \u201cDell joins the AMD exodus\u201d the consequences<\/p>\n
would be costly for Dell. He noted that Intel\u2019s CEO and<\/p>\n
Chairman \u201care prepared for jihad if Dell joins the AMD<\/p>\n
exodus. We will get ZERO [payments] for at least one<\/p>\n
quarter while Intel \u2018investigates the details\u2019\u2014there\u2019s no<\/p>\n
legal\/moral\/threatening means for us to apply and avoid<\/p>\n
this.\u201d 12<\/p>\n
Although Dell complained that its refusal to use<\/p>\n
ADM processors was hurting its sales, Intel kept Dell<\/p>\n
loyal, throughout 2004, by increasing its quarterly<\/p>\n
payments to $300 million per quarter, an amount equal<\/p>\n
to almost a third of Dell\u2019s quarterly net income and<\/p>\n
apparently enough to compensate Dell for any sales<\/p>\n
declines.<\/p>\n
But Dell continued to lose market share and its CEO,<\/p>\n
Michael Dell, became increasingly frustrated. On November<\/p>\n
4, 2005, Intel\u2019s CEO, Paul Otellini wrote an email saying<\/p>\n
that he had just received \u201cone of the most emotional<\/p>\n
calls I have ever, ever had with [Michael Dell].\u201d Otellini<\/p>\n
noted that \u201c[Michael Dell] opened by saying \u2018I am tired of<\/p>\n
losing business\u2019. . . He repeated it 3\u20134 times. I said nothing<\/p>\n
and waited. [He said] he has been traveling around the<\/p>\n
USA. He feels they are losing all the high margin business<\/p>\n
to AMD-based [computers]. Dell is no longer seen<\/p>\n
as a thought leader.\u201d 13 A week later, Michael Dell sent<\/p>\n
an email to Otellini complaining that \u201cWe have lost the<\/p>\n
performance leadership and it\u2019s seriously impacting our<\/p>\n
business in several areas.\u201d Otellini responded to Dell\u2019s<\/p>\n
complaints by pointing out how much Intel was paying<\/p>\n
Dell: \u201cWe are [now] transferring over $1 billion per year<\/p>\n
to Dell for its efforts. This was judged by your team to be<\/p>\n
more than sufficient to compensate for the competitive issue.\u201d<\/p>\n
14 On November 25, Michael Dell wrote in an email<\/p>\n
to Otellini that \u201cNone of the current benchmarks and reviews<\/p>\n
say that Intel-based systems are better than AMD.<\/p>\n
We are losing the hearts, minds and wallets of our best<\/p>\n
customers.\u201d 15<\/p>\n
In spite of realizing that boycotting AMD\u2019s processors<\/p>\n
was hurting its revenues, Dell remained so loyal to Intel<\/p>\n
that in February, 2006, Otellini joked that Dell\u2019s CEO<\/p>\n
was \u201cThe best friend money can buy.\u201d 16 Intel continued<\/p>\n
to increase its payments to Dell through 2005 and 2006<\/p>\n
until they reached a high of $805 million a quarter in early<\/p>\n
2006, an amount equal to 104 percent of Dell\u2019s net income<\/p>\n
per quarter that year.<\/p>\n
But 2006 was the year Dell finally broke away from<\/p>\n
its agreement to not use AMD processors. That year<\/p>\n
it purchased Alienware, a computer manufacturer that<\/p>\n
made high-end gaming computers with AMD microprocessors.<\/p>\n
In April of that year Michael Dell sent an email<\/p>\n
to his top executives which said: \u201cWe have been looking<\/p>\n
at the situation for a long time, and have decided<\/p>\n
to introduce a broad range of AMD based systems into<\/p>\n
our product line to provide the choice our customers are<\/p>\n
asking for.\u201d In the second quarter of the year, perhaps<\/p>\n
testing Intel\u2019s reaction, Dell announced a single new line<\/p>\n
of high-end computers with AMD chips inside. That<\/p>\n
quarter its payments from Intel dropped to $554 million.<\/p>\n
The next quarter Dell announced additional lines of PCs<\/p>\n
with AMD processors inside and Intel paid it only $200<\/p>\n
million.<\/p>\n
Intel\u2019s Board Chair told Intel\u2019s CEO that the company<\/p>\n
should respond harshly to Dell\u2019s actions: \u201cI think you<\/p>\n
should reply in kind. Not a time for weakness on our part.<\/p>\n
Stop writing checks immediately and put them back on<\/p>\n
list prices [i.e., on prices with no discounts or rebates]. 17<\/p>\n
The next day Intel CEO Otellini instructed his people<\/p>\n
that \u201cWe should be prepared to remove all [payments] and<\/p>\n
related programs. Post haste . . . then we ought to enter<\/p>\n
negotiations.\u201d<\/p>\n
Now subject to Intel\u2019s punishment, Dell received<\/p>\n
no more \u201crebates.\u201d In 2007, Dell\u2019s net income fell to<\/p>\n
$2.58 billion, down from $3.57 billion in 2006. The<\/p>\n
company recovered a bit in 2008 when it posted a net<\/p>\n
income of $2.95 billion, but then it began a downward<\/p>\n
234 THE MARKET AND BUSINESS<\/p>\n
slide to $2.48 billion in 2009 and $1.43 billion in 2010.<\/p>\n
Between 2001 and 2006, Intel had pumped an estimated<\/p>\n
total of about $6 billion into Dell\u2019s income figures. Because<\/p>\n
Dell had not reported that most of its profits during<\/p>\n
those years were cash it was receiving from Intel,<\/p>\n
the U.S. Securities and Exchange Commission (SEC)<\/p>\n
accused Dell and its officers of deceiving investors who<\/p>\n
had been told by the company that it\u2019s high profits were<\/p>\n
due to its ultra-efficient management of its supply chain,<\/p>\n
its direct-sales strategy, its cost reduction initiatives, and<\/p>\n
the declining costs of computer parts. 18 Dell had become<\/p>\n
one of the most admired companies in America because<\/p>\n
it was falsely assumed that its strong profits were due to<\/p>\n
the company\u2019s management skills.<\/p>\n
Intel pressured other big companies, like HP and<\/p>\n
IBM, into refusing to use AMD processors. Unlike<\/p>\n
Dell, HP and IBM did not agree to completely boycott<\/p>\n
AMD\u2019s processors. In HP\u2019s case, Intel got HP<\/p>\n
to agree to limit its purchases of AMD processors to<\/p>\n
5 percent or less, and Intel agreed to give HP a \u201crebate\u201d<\/p>\n
of $130 million, spread out over a year. 19 IBM agreed<\/p>\n
to only use AMD processors in its \u201cHigh Performance<\/p>\n
Computers.\u201d 20<\/p>\n
The FTC\u2019s lawsuit against Intel never made it to<\/p>\n
court. On Wednesday, August 4, 2010, the FTC announced<\/p>\n
that without admitting guilt, Intel had agreed<\/p>\n
to settle the FTC\u2019s antitrust lawsuit. In a press release the<\/p>\n
FTC wrote that under the settlement, \u201cIntel will be prohibited<\/p>\n
from conditioning benefits to computer makers<\/p>\n
in exchange for their promise to buy chips from Intel exclusively<\/p>\n
or to refuse to buy chips from others; and [from]<\/p>\n
retaliating against computer makers if they do business<\/p>\n
with non-Intel suppliers by withholding benefits from<\/p>\n
them.\u201d In addition, Intel was prohibited from using its<\/p>\n
compilers or its libraries of software code to inhibit the<\/p>\n
ability of programs to run on competitors\u2019 microprocessors.<\/p>\n
Some observers argued that the restrictions of the<\/p>\n
settlement no longer mattered since Intel had once again<\/p>\n
taken the lead in the x86 processor market and AMD was<\/p>\n
again a trailing competitor. In the first quarter of 2006,<\/p>\n
according to CPU Benchmarks, AMD\u2019s market share<\/p>\n
had climbed as high as 48 percent and Intel\u2019s had fallen<\/p>\n
to 51 percent. But AMD\u2019s share dropped after that and<\/p>\n
by 2011, Intel had 71 percent of the x86 microprocessor<\/p>\n
1. In your judgment is Intel a \u201cmonopoly\u201d? Did Intel<\/p>\n
use monopoly-like power; in other words, did Intel<\/p>\n
achieve its objectives by relying on power that it had<\/p>\n
due to its control of a large portion of the market? Explain<\/p>\n
your answers.<\/p>\n
2. In your judgment, were Intel\u2019s rebates ethical or unethical?<\/p>\n
Explain your answer.<\/p>\n
3. Was it unethical for Intel to use its compilers and its<\/p>\n
libraries of software code in the way it did, or is this<\/p>\n
permissible for companies in a free market economy?<\/p>\n
Explain your answer.<\/p>\n
4. Were Intel\u2019s rebates unethical? Explain why or why not.<\/p>\n
5. In your view, did Intel violate either of the two key<\/p>\n
sections of the Sherman Antitrust Act? Explain.<\/p>\n","protected":false},"excerpt":{"rendered":"
On November 12, 2009, Intel Corp. gave Advanced Micro Devices (AMD) $1.25 billion to settle a lawsuit AMD filed against it in 2005. Intel\u2019s CEO Paul Otellini said he agreed to pay $1.25 billion to settle AMD\u2019s lawsuit because he Read More …<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-70483","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/70483","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/comments?post=70483"}],"version-history":[{"count":0,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/70483\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/media?parent=70483"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/categories?post=70483"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/tags?post=70483"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}