1 answers the question Context This week’s discussion will provide you with an opportunity to apply Froeb’s analytic method. Read the example in the discussion instructions while keeping in mind the following questions: Who made the bad decision? What information did they have? And was it good, bad, or unclear? What was their incentive? Instructions Read the following and then respond to the discussion prompt. Intel made large loyalty payments to HP in exchange for HP buying most of their chips from Intel instead of rival AMD. AMD sued Intel under the antitrust laws, and Intel settled the case by paying $1.25 billion to AMD. Address the following in your discussion post: What incentive conflict was being controlled by these loyalty payments? What advice did Intel ignore when they adopted this practice (consider how the Robinson-Patman Act applies to their practice) and speculate why Intel ignored the advice. Part 2 response one student below Intel Vs AMD Royalty Case Study Business competition helps participants gain a competitive edge over peers. The Robinson Patman Violations offer insight into these, whereby sellers are barred from selling the same commodity at different prices, discrimination in giving allowances or varying the compensation for other services (Federal Trade Commission, 2017). Price discrimination gives some players a competitive edge in the market in total disregard of their efficiency (Federal Trade Commission, 2017). The act applies to commodities and purchases. It states that goods must be of like grade and quality, there ought to be some injury in the competition, and the sale must happen across a state line (Federal Trade Commission, 2017). In the case of Intel vs AMD market competition, Intel made a loyalty payment to HP in exchange for the continued purchase of Chips from Intel. A lawsuit was brought forth by AMD under the anti-trust laws; the case was settled through a $1.25 billion payment to AMD. The incentive that brought about the lawsuit was the desire to sell commodities (Intel chips) and purchase only from one supplier; Intel. Intel was assured of a ready market through the loyalty program since HP is a leading computer producer and requires millions of chips components. By making the loyalty payments, Intel ignored the advice to avoid causing Injury to the competition. Competitive Injury occurs in two lines, the primary and secondary line (Federal Trade Commission, 2017). In the case of Intel, the company caused competitive Injury through loyalty programs that saw it receive price advantages (Federal Trade Commission, 2017). The Injury was at the buyer’s level, whereby AMD chipped computers are more expensive than Intel. Possible defences such as cost of manufacture or offering a price discount in good faith did not apply. The requirement that all customers be treated similarly was also ignored. Thus, Intel got an unwarranted due advantage over its competitor. References Federal Trade Commission. (2017, December 15). Price discrimination: Robinson-Patman Violations. Federal Trade Commission. Retrieved November 25, 2021, from https://www.ftc.gov/tips-advice/competition-guidance/guide-antitrust-laws/price-discrimination-robinson-patman.
