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F.T.C. Sues Intel

The Federal Trade Commission is taking action against Intel, alleging that the chip-maker unfairly attempted to monopolize the market for microprocessors.

The graph here doesn’t prove that the F.T.C.’s allegation is baseless, but it does suggest that competition continues to serve computer consumers very well indeed — so well that one wonders what the F.T.C. is thinking in taking this action: prices of personal computers and peripheral equipment are today, on average, less than one-seventh what they were in 1999.

And here’s more evidence that the F.T.C.’s action, if successful, likely won’t make markets more competitive or consumers better off: Intel’s rivals are rejoicing.  According to the Wall Street Journal,

When the Federal Trade Commission announced its suit against Intel on Wednesday, longtime rival and critic Advanced Micro Devices flashed a simple thumbs-up. Nvidia, another Silicon Valley chip maker, was turning cartwheels.

“We’re ecstatic,” says Dan Vivoli, an Nvidia senior vice president.

Economic models can be, and have been, constructed to show that it’s possible for Big Bad Monopolist to harm consumers and, simultaneously, harm its competitors.  But (as the data presented in the link above suggest), what is possible isn’t necessarily plausible.

A splendid rule of thumb for economic reality (if not for clever economic theorizing) is that a firm — one with no special government protection — that truly threatens to harm consumers by exercising genuine monopoly power is a firm that cheers its rivals and potential rivals.  Put differently, firms that complain about their competitors are firms seeking government-granted protection from the bracing forces of competition.

Competing against rivals who aren’t very responsive to consumers – whose prices are high or whose quality is low – is much easier than competing against rivals who are quite insistent and adept at satisfying consumers with good deals.