Corporate & Securities Law

Hovenkamp on the FTC?s Case Against Intel

By David Fischer

Herbert Hovenkamp has posted a paper on SSRN regarding the FTC’s case against Intel (via the Antitrust & Competition Policy Blog).  From the abstract:

One important concern that arises when the FTC reaches beyond the Sherman Act is that the remedy itself not be contrary to the consumer welfare goals of the antitrust laws. Pricing is particularly complex in a market with high fixed costs and short product cycles, as is the case for Intel?s processor chips. …

In this case the FTC requests that Intel be required to keep prices at an irrationally high level. Limitations on ?below cost? pricing would require Intel to include a mandated multiple of fixed costs into its bids, even though any firm in Intel?s situation could profitably bid prices down to its incremental costs. Some market share discounts would apparently be forbidden without any proven relationship to cost. Relief such as this will serve the goal of giving Intel?s rivals a price umbrella under which they can profit, but it is not calculated to produce competitive solutions that will benefit consumers.

In the article he writes that four of the possible reasons the FTC chose to bring a section 5 case are:

a. The FTC has procedural advantages as fact finder or expertise advantages as law maker;

b. The FTC might wish to condemn conduct without inviting tagalong private lawsuits;

c. The FTC may use §5?s ?unfair methods of competition? language to reach conduct that falls outside the prohibitory language of the Sherman Act; [and]

d. The FTC would like to address the same practices that the Sherman Act addresses, but under more aggressive standards than the courts? current interpretations of §2 permit.

Hovenkamp’s support for the second possibility is a quote Chairman Leibowitz and Commissioner Rosch’s statement that concern over class actions and treble damages available in private actions has caused the courts to limit the reach of antitrust law.  This statement, however, concerns Hovenkamp’s fourth possibility (unless he too believes that class actions and treble damages have resulted in bad law; but the remainder of the article leads me to believe that is not the case).  In any event, the article is a good read.

Share on Facebook

Full post as published by Antitrust Review on February 23, 2010 (boomark / email).