Corporate & Securities Law

An Antitrust Analysis of the Federal Trade Commission’s Complaint Against Intel

As readers of TOTM know, I’ve been critical of both the Federal Trade Commission’s Complaint against Intel from a consumer welfare perspective as well as the wobbly intellectual underpinnings of the Commission’s attempt to expand its FTC Act Section 5 authority to evade (see also here) the more stringent monopolization standards under Section 2 of the Sherman Act.

The paper I’ve posted to SSRN today, An Antitrust Analysis of the Federal Trade Commission’s Complaint Against Intel, combines these two themes.  The paper will be released as the first installment of the International Center for Law and Economics Antitrust & Competition Policy White Paper Series.  The paper considers the economic merits of the Commission’s anticompetitive theory, evaluates the testable implications of that theory against the available data, and offers a critique of the Commission’s proffered justifications for the Section 5 allegations.

Here is the abstract:

The Federal Trade Commission?s recent complaint targets the Intel Corporation for antitrust scrutiny under Section 5 of the Federal Trade Commission Act and Section 2 of the Sherman Act. The Commission alleges that, through the use of loyalty discounts offered to microprocessor purchasers, Intel unlawfully excluded rivals and harmed consumers in the microprocessor and graphics processor markets. This article analyzes the Commission?s claims. The Commission?s reliance on Section 5 should be viewed with suspicion because it allows the Commission to evade the more stringent standards of proof that have been emerged in the Supreme Court?s Section 2 jurisprudence. Furthermore, the Commission?s actions surrounding its prosecution of Intel reflect an adversarial attitude that undermines the Commission?s stated comparative advantages over private litigants. Moreover, the Commission?s allegations form a weak case when evaluated under the conventional Section 2 standard. Unlike many Section 2 cases alleging speculative future consumer harm, the disputed conduct in this case has been in the marketplace for nearly a decade, and its competitive footprint is readily observable. The available data do not support the Commission?s theory that Intel?s behavior harmed consumers. To the contrary, it is almost certain that Intel?s distribution contracts led to tangible, demonstrable consumer welfare gains in the form of lower prices. Accordingly, the Commission?s complaint against Intel threatens to harm consumers directly in the computer industry as well as indirectly by undermining the stability and certainly which longstanding Section 2 jurisprudence has afforded the business community by requiring the plaintiffs offer rigorous proof of competitive harm.

Download it here.

Full post as published by Truth on the Market on June 15, 2010 (boomark / email).