Over at Anti-Dismal, Paul Walker states the following when discussing anti-competitive action against Intel:
The whole point of market power is to raise prices, and thus profits. But how can Intel be accused of anti-competitive behavior when it was giving “hidden discounts” to computer makers? A real anti-competitive monopolist, with real market power, acting in a truly anti-competitive way, would be in a position to raise prices, not lower them.
However, they are being attacked for predatory pricing – which means the “high prices” we are discussing have to be compared to the appropriate counterfactual.
At some level prices have been falling because of improving technology – so looking at the CPI figure is not exactly what we want to do. We want to look at what Intel is supposedly doing to cause the complaint of predatory pricing. Now Intel is suspected of predatory pricing because it is giving kickbacks (and so effectively lower input costs) to people who use their chips.
If doing this is sufficient to prevent the entry of some competitors (because of significant fixed costs of entry – something that seems descriptive of the micro-chip industry, both from setting up factories and getting downstream firms to integrate your product), and thereby keep prices higher than they would have been in the case with competition, then it is a legitimate complaint.
Another way of viewing it is – has Intel set itself up in such a way that it credibly commits to the threat of a new entrant. If we can make this case predatory pricing could exist.
Now I am not saying that the this is necessarily what is happening – but in a global industry with only 2 (maybe 3 😛 ) firms it is definitely worth looking into. Personally I believe that there could be economies of scale, or that it makes sense to have a “benchmark chip” which Intel currently has patent over. But there is a genuine case for an anti-trust case study here.