Intels Rebates - Case Study

Published: 2021-07-27 01:12:11
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In your judgment is Intel a monopoly? Did Intel use monopoly-like power, in other words, did Intel achieve its objectives by relying on power that it had due to its control of the market? Explain your answers.

A monopoly has the total control of the supply of goods and services. Such a company has the ability to set product prices due to its powerful grip on the market. As the case demonstrates, 70 percent of the world market was held by Intel Corp in the manufacture of microchips. This comfortably makes it a monopoly. The nearest competitor was AMD which had about 20 percent of the market share while 10 percent was held by the other companies who were trying to remain competitive in the business. With Intel Corp holding the largest market share, it had accumulated a lot of wealth enough to pay off retailers to stop the purchase of its competitors products. Intel was also a monopoly because the competition was so small that it could afford to target the serious competitor and plan to take them out using rebates.

In your judgment, were Intels rebates ethical or unethical? Explain your answer.

In my judgment, the rebates used by Intel were unethical. Rebates are like discounts and should be based on the purchase. For example, they can be given after a customer has purchased a certain number of products in order to encourage them to purchase more or stay loyal. This tactic helps companies sell off products at large quantities even if it is at a lower price because the volume sales drive up revenues. However, Intel decided to give rebates to companies not based on the number of microchips purchased but only after they agreed to stop using their competitors products and specifically, AMDs products. In essence, what Intel was doing was paying off retailers to stop purchasing from a competitor rather than engaging in healthy competition.

Was it unethical for Intel to use its compilers and libraries of software code in the way it did or is it permissible for companies in a free market economy? Explain your answer

The use of the compilers and libraries was unethical. The compilers and libraries tampered with AMGs microchips making them perform poorly after previously working and performing perfectly to the dissatisfaction of the consumers who gave negative feedback on the product. The aim was to turn the clients away from AMG by sabotaging AMGs processors. In the business world, once AMGs reputation was damaged, it would have becomes almost impossible for the company to recover and win back the consumer's trust. Engaging in sabotage was unethical and is not permissible in a free market economy.

Were Intels rebates unethical? Explain why or why not.

The rebates used by Intel were unethical because they were not based on the sale. They were simply payoffs that were made by Intel. The payoffs were so huge that to some companies such as Dell, the payoff made quite a significant part of their annual revenue. Dell knew that its soaring profits were unethical and therefore lied that the profits were as a result of efficient and skilled management. The payoffs kept on increasing significantly throughout the years and could not be explained to shareholders and this is proof that all the parties involved knew that the rebates were unethical.

In your view, did Intel violate either of the two key sections of the Sherman Antitrust Act? Explain

I believe that Intel violated the Sherman Antitrust Act due to the use of unfair means of competition and illegal monopolization. This is because Intels actions impacted negatively on their competitors business. Companies have the obligation to adhere to the rules set out by the Act in order to level the playing ground for every entrepreneur to have an equal opportunity. The provisions of the Act ensure that prices are kept reasonably low while still maintaining the quality of the product. Furthermore, the Act protects competition for the benefit of the consumer and competition is beneficial as it makes companies innovative and efficient all to the benefit of the consumers.

 

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