AMD is fighting a similar battle with Intel in India

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The US too is trying to daunt its biggies from indulging in such monopolistic malpractices. In an ongoing case filed in the US District Court of Delaware, microchip player AMD has charged market leader Intel with pay-offs to Acer, Dell and other major Japanese manufacturers to not entertain similar offers from AMD. In fact, the Korea Fair Trade Commission, after two years of investigation, has already fined Intel $25.4 million in June this year for offering rebates to South Korean computer companies, in a bid to undercut AMD.

AMD is fighting a similar battle with Intel in India, alleging that most state and central government procurement tenders demand only Intel chips in PCs. However, unlike the west, India’s regulatory mechanisms are almost non-existent. The decades old MRTP Act has no claws and despite the New Competition Act of 2002, the Competition Commission of India is still an elusive chimera, for now functioning merely as an advocacy body with limited staff on its rolls.

Those in favour of the Jet-Kingfisher alliance, of course, relate back to the days when the European Commission cleared a similar cooperation pact between Lufthansa of Germany and Scandinavian Airlines System. But they forget that the region had adequate deterrence mechanisms in place. The Lufthansa-SAS alliance was approved on the pre-condition that the airlines take steps to ensure the link does not turn into a monopoly (the carriers had to give up certain slots, flights and agreements with other airlines).

Dealing with cartels has become an omnipresent threat to the global economic well being, especially in these inflationary times. Studies suggest that recent cartels raised prices in Japan by 16.5%; in United States, estimates suggest that hard core cartels can cause prices to up by over 60-70%. Clearly, a lot is at stake for the Indian economy, also tethering on the brink of sky-rocketing prices. Of course, a lot of it is simply attributable to the global economic recession, but then it has always been tough to establish cartels and collusions. If politics makes for strange bedfellows, businesses take the cake for sleeping with the enemy… uhm, figuratively speaking, of course!

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Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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