Does Antitrust Enforcement in High Tech Markets Benefit Consumers? Stock Price Evidence from FTC v. Intel

Antitrust enforcement efforts in the United States and abroad have been ramped up in high-tech industries, rekindling stale and largely unresolved debates concerning the appropriate role of antitrust enforcement in high-tech markets. Like the previous enforcement actions against Microsoft, and likely enforcement efforts in the future against similarly situated business firms, recent enforcement efforts challenging Intel's business practices raise the same fundamental issues concerning the effectiveness of competition policy in dynamically competitive industries. While opinions and broad-sweeping assertions as to the appropriate role of antitrust in these markets are common, traditional empirical approaches have left fundamental issues unresolved. The enforcement actions against Intel, for example, have resulted in the assessment of over $3 billion in fines and consigned authority to the Federal Trade Commission to impose a variety of restrictions on Intel’s pricing practices, distribution arrangements, and product design choices. But what do we know about the likely effects of these enforcement actions on consumers? Empirical evaluation of business practices in high tech-markets is incredibly complex partly because these cases involve conduct that can theoretically prove either pro-competitive or anti-competitive, because regulators must act or forbear in light of "false positives" which can chill innovation, and because distinguishing pro-competitive from anti-competitive conduct in a technologically advanced setting is particularly difficult. This paper evaluates the likely competitive effects of Intel’s conduct through two approaches. The conventional approach focuses on traditional antitrust metrics in product markets: prices and output. The second, alternative approach involves turning to financial markets for valuable information. Competing antitrust economic theories can be tested against the collective wisdom of the market. In the case of Intel, where the disputed conduct in this case has been in the marketplace for nearly a decade and its competitive footprint is likely to be readily observable, this approach is especially attractive. Under either approach, the available data do not support the theory that Intel’s behavior harmed consumers