Intel / AMD ACE conference 2009

Transcription

1 , 26 NOVEMER 2009 Intel / AMD ACE conference 2009 Adrian.Majumdar@rbbecon.com

2 Introduction 2 Intel s Dominance Intel s Abuse Commission s effect-based approach to conditional rebates Consumer harm

3 Dominance 3 Product no wider than x86 CPU architecture No need to define product market Intel v high share on any segment (so long as no wider than x86) World wide geographic market both parties agree with this definition Intel dominant 70%+ share on any segment Very substantial sunk costs and risk of infringing IP

4 Abuse conditional rebates 4 Discounts conditional on (near) exclusivity Conditional discounts targeted on key routes to market Dell and HP of particular importance (largest buyers and operate in all segments) Strong presence in most profitable part of market (e.g. enterprise) Legitimise a new CPU In essence, the issue was the withdrawal of a large lump sum amount if the target was not met (similar to a fidelity rebate)

5 Application of the as efficient competitor test (1) 5 Case law indicates Commission could have just stopped at demonstrating conditional discounts? In any event, Commission employed effects-based analysis as efficient competitor test: the test establishes at what price a competitor as efficient as Intel would have to offer CPUs in order to compensate an OEM for the loss of any Intel rebate ( 29, Summary). Intel had no objection to the test, just its parameterisation: AAC (Commission assumes one year relevant time period) Captive base

6 As efficient competitor test example for HP 6 HP receives $R conditional on reaching the target. The as efficient competitor must sell the required units at AAC in order to compensate HP for switching. Unit price Total needs of HP Average selling price ASP R Average avoidable cost AAC Required units Target Units purchased

7 Impact of captive base 7 But as the efficient competitor cannot profitably compete if captive base is sufficiently large Unit price CAPTIVE BASE Total needs of HP Average selling price ASP R Average avoidable cost AAC Captive units Required units Target Units purchased

8 Contestable share 8 Commission argues Intel is a must-stock : first mover and brand advantage means that OEMs will almost always have an Intel platform for a given target customer base. Submissions and documentary evidence indicating difficulty in ramping up AMD share quickly Staggered renewal of platforms: in any quarter, OEMs locked-in to previous decisions on which chip to use in a given platform makes it easier for Intel to roll over its captive base...

9 Quarterly renegotiation with installed base Quarter 1 Quarter 2 Contestable platform 9 Contestable platform

10 Harm to competition and consumers Short term loss of choice Documentary evidence of OEMs wishing to develop AMD solutions but unable to do so due to Intel practices 10 Same true of naked restrictions Long term stunting AMD growth Weakened AMD s ability to chip away at Intel s captive base (i.e. reduces the number of competing platforms in any given segment and protects Intel s captive base over time) Intel shut AMD s window of opportunity in the early 2000s, a critical period when AMD gained technical superiority (e.g. Athlon 64 and Opteron). AMD has reduced incentives and ability to innovate yet such innovation important to compete with Intel as AMD the only rival.