Study Guide
Definition of Monopoly
A market condition in which there is only one seller of a commodity. By
virtue of control over supply, the seller exerts nearly total control over
prices. By adopting laws excluding competition from an industry, governments
have created public service monopolies. These may be public monopolies (e.g.,
the U.S. Postal Service) or publicly regulated private monopolies (e.g., power
and light companies).
Control of a supply by a few producers, who often act to restrain
price competition, is known as an oligopoly. In the U.S., most forms of
monopoly and, to a lesser extent, oligopoly are illegal under Antitrust
Laws. The government grants monopolies in the form of patents and copyrights
to encourage the arts and sciences.
- Microsoft
- FTC vs. Intel
- B2B Exchanges
- Airline reservation systems
- Justice Department vs. IBM
- U.S. vs. IBM Corp. and Storage
Technology Corp.
- U.S. vs. Computer
Associates
Intel
- History
A very engaging debate about FTC's complaint
against Intel. One side is a former attorney
for Intel, the other, the director of the FTC's Bureau of Competition. Both
summarize some of the issues at hand. Such as when does the line of agressive
competition cross the Sherman Act of unfair competition. FTC claims that Intel is favoring those companies
that don't partner with competitors allowing them to new arcgutectures, which
often results in a time-to-market advantage. Also Intel has withheld design
information from three OEM's one including computer giant Compaq. Intel claims
they have the right to withhold thier intellectual properties to due to agreements
with the companies.
- How valid is the FTC's arguement?
Some feel the rising success of the Advanced
Micro Devices(AMD), gives Intel a stronger arguement. January 1999,
an article surfaced that showed how AMD's Processor was outselling Intel's.
Also soon after AMD was first to market with the first 1Ghz processor. Then
AMD later got a lucrative deal with Gateway. Most AMD's success was after
the FTC's settlement with Intel, however just how valid was the FTC's argument.
On March 8, 1999, The FTC and Intel corp have reached a partial
settlement in the FTC's antitrust case. If approved, the settlement will likely
provide a clearer interpretation of U.S. intellectual property laws. While
neither side would comment on details of the proposal, Intel spokesman Howard
High said discussions between Intel and the FTC focused predominantly on
the interpretation of laws governing intellectual property. Many analysts
believe that Intel has come away unscathed. And that it made many of the changes
necessary before settlement was even made. Intel did not want to follow the
same road as Microsoft and decided instead to concentrate on keeping their
hold on the market.
Events
- Chronology
of Intergraph's lawsuit against Intel for anti-competitive behavior
Intergraph
(Intergraph claims that Intel refused to continue
giving Intergraph development updates on new technology because Intergraph
refused to liscense its 'Clipper' technology to Intel. The FTC claims that
Intel used its market power as the dominant m icroprocessor producer in the
computer industry to muscle Intergraph, Compaq, and Digital Equipment into
its own liscensing terms. The FTC states that this is a violation of anti-competitiveness
laws and that Intel must be held accountable for its monopo listic actions.
Intel has responded that although it is a tough bargaining company, it has
a well known rigorous internal policy to remain well within the antitrust
laws.)
- Federal Trade Commission (FTC) begins investigation
- Intergraph claims that Intel tried to acquire rights to Intergraph's
patents on the architecture behind the cache memory management on the processor.
Intergraph further states that when they refused to comply to Intel's requests,
Intel began to take measures to pressure Intergraph through its powerful
position in the micrprocessor market. Intergraph then filed suit against
Intel for anticompetitive practices at which point the FTC became further
involved.
- The Federal Trade Commission charges Intel with utilizing its monopolistic
powers to deny Digital Equpiment, Intergraph, and Compaq access to key technology
because they would not liscense their patents to Intel.
- Intel claims they have the right to their confidential information
and that they are protected under business laws as well as the First Amendment
to cdistribute it to anyone they choose under any circumstances they choose.
- Intergraph requests a preliminary injunction so that it can continue
its business.
B2B Exchanges
- One growing trend in business is the idea of business-to-business
exchanges of information and sometimes, even goods and services. The idea
behind these exchages is that the companies involved can specialize further,
and trade information. Thus, the efficiency of the industry as a whole should
be increased and prices should drop.
- So, what's the ethical problem? Well, what if a company isn't invited
to the exchange? Say, for instance that there are three big manufacturers
of Widgets, let's call them A, B, and C. Well, there is also a little Mom
& Pop's Widget maker, namely D. Well, if A, B, and C are all part of
Super-Big-Widget Exchage, but D isn't big enough to be included, then A,
B, and C, could possibly engage in some etically poor business practices,
which might lead to their having an unfair advantage over D.
- Most B2B exchanges are being very careful not to violate any antitrust
laws,
and are even training their employees on how not to violate those laws. For
more information follow the links under this topic on the index of topics
page.
Airline Reservation Systems
- The recently stepped-up U S. Justice Department investigation into
possible price fixing among major airlines make Feds wonder if all's fair
in the air.
- Around 90 percent of all U.S. flights are booked through Apollo,
Galileo, Worldspan, Sabre, Amadeus and System One, the largest airline computer
reservations systems used by travel agents to book flights.
- With the rapid development of airline booking sites on the World
Wide Web, however, it's just a matter of time, say some airline industry
analysts, before a significant number of consumers begin bypassing travel
agents and the computer reservat ions systems altogether to book flights
directly with airlines via their own personal computers.
- Airline
reservations systems face Internet threat
Justice Department vs. IBM
- History
The government filed suit against IBM
in January 1969, accusing the company of monopolizing the market for general
purpose digital computers, systems, and submarkets for peripherals in violation
of section 2 of the Sherman Act. The trial began on May 19, 1975. U.S. v.
IBM went on to last more than a decade and spanned over 700 trial days, 950
witnesses, 17,000 exhibits, and 100,000 pages of court transcript. The dispute
came to a sudden end in January 1982 when the government unexpectedly dropped
its complaint. Assistant Attorney General William Baxter explained that he
had reviewed the case and determined it was "without merit." This was basically
a failure for the U.S. Government, but it caused people to question the
anti-trust laws.
- For IBM and Against the Anti-trust
A parade of economists testified the government had no case. Some concluded
antitrust laws were obsolete and ineffective in overseeing today's technologically
progressive industries. Others criticized the government's economic analysis
as unsound. One MIT economist went so far as to claim "...the economic theories
advanced by the Antitrust Division and its economists were not very sensible.
This is not simply a matter of disagreement between opposing experts over
the facts or the application of economics to close questions. The government's
economic case often lacked coherence; some of the propositions could not have
been true or relevant under any reasonable interpretation of the facts."
David
Boies, Justice Deptartment's Lead Attorney Boies began with the
department's antitrust division in 1997. Currently a partner in the firm of
Boies & Schiller LLP, Boies has tried a number of cases for the Justice
Department, including U.S. v. IBM, in which he defended IBM against the government's
allegation of monopolization in the computer-systems business.
- Why the failure?
IBM was supposed to be a monopolist, but the relevant markets were never
clearly defined. When asked, different government lawyers gave different
answers. Nor was it clear what specific IBM conduct was supposed to violate
antitrust law. An economic autopsy of the case written later by some of IBM's
expert economists noted that the government assumed that the company was
a monopolist even though it did not act like one. The government dealt with
this embarrassing inconsistency by "distort[ing] IBM's competitive acts into
'anticompetitive' ones. Nothing is more revealing about the government's
case than its constant complaint of low rather than high prices as the symptom
of monopoly."
- Theory on the Results of the anti-trust case
Some experts point at the US v. IBM case, which lasted over a decade, as
evidence that antitrust assaults can distract a company's leadership. The
computer giant faltered in the early 1980s and missed a good portion of the
PC revolution.
U.S. vs. IBM Corp. and Storage Technology Corp.
- What the Storage Technology Corp. does
The IBM Enterprise
Storage Server (ESS) is a disk storage system specifically targeted
to large, multi-platform, networked environments. Based on IBM's Seascape
Storage Enterprise Architecture, it provides the enterprise with a scalable,
high performance data storage and access solution that interfaces directly
to multiple hosts and platforms and can be centrally managed through a
Web-based interface.
U.S. vs. Computer Associates
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