Wright’s Analysis of Antitrust Metrics Does Not Reveal Anticompetitive Behavior
Contact: Amy Smorodin
January 12, 2011 – Evaluation of the competitive effects of Intel’s loyalty discounts, which garnered scrutiny from antitrust authorities, does not support claims that the company’s actions have harmed consumers. Analysis of market share, prices, and relevant financial markets fail to show higher prices or abnormal financial returns, concludes Joshua Wright in, “Does Antitrust Enforcement in High Tech Markets Benefit Consumers? Stock Price Evidence from FTC v. Intel,” released today by the Technology Policy Institute. The paper is a revised version of a paper presented at the recent TPI conference, “Antitrust and the Dynamics of Competition in High-Tech Industries.”
In the paper, Wright, Associate Professor at George Mason University School of Law and Department of Economics, notes there are significant disputes among economists over how to assess intervention in technology markets both because of their highly dynamic nature and because misguided antitrust enforcement can chill innovation and slow economic growth.
Wright evaluates the effects of Intel’s loyalty discounts on competition using two approaches: prices and output, the traditional antitrust metrics focusing on product markets, and data from the relevant financial markets. The author notes that any anticompetitive behavior should be readily apparent in either analysis since the company has been engaged in offering such discounts for over a decade.
According to Wright, if Intel’s actions were anticompetitive as alleged by the Federal Trade Commission and other international antitrust enforcement agencies, one would expect the company’s market share and prices to increase at the expense of its rivals. However, AMD, Intel’s primary rival, showed no significant drop in market share or sales after the loyalty discounts were instituted. To the contrary, data also show that AMD’s profit margins remained constant while its sales increased during the relevant time period. Further, a continuous overall decline in microprocessor prices also contradicts claims of consumer harm.
Wright also evaluates financial market data to observe the likely competitive effects of Intel’s distribution contracts. The author found that the company’s main competitor made significant gains in the financial markets during the majority of time Intel was offering loyalty discounts. In addition, Wright calculated cumulative abnormal returns over the same time period and found that Intel’s abnormal return rate trending downward, when one would expect an increase if the company was engaging in anticompetitive conduct.
“While both traditional and financial market approaches are necessarily indeterminate in the sense that AMD could have done even better but for Intel’s loyalty discounting, it is the plaintiff’s burden to demonstrate that Intel’s conduct harmed competition and ultimately, consumers,” Wright concludes. “We conclude that, under either approach, the data do not support the theory that Intel’s behavior harmed consumers.”
“Does Antitrust Enforcement in High Tech Markets Benefit Consumers? Stock Price Evidence from FTC v. Intel” is available on the TPI website. Two previously-released papers from the event, “Antitrust and Vertical Integration in ‘New Economy’ Industries,” and “Antitrust in High-Tech Industries,” are also available.
The Technology Policy Institute
The Technology Policy Institute is a research and educational organization that focuses on the economics of innovation, technological change, and related regulation in the United States and around the world. More information is available at https://techpolicyinstitute.org/