Intel Corp (INTC): The "selling below cost" charge is confu...

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Re: Elmer Phud post# 46226

Saturday, 07/28/2007 10:34:40 AM

Saturday, July 28, 2007 10:34:40 AM

The "selling below cost" charge is confusing grammar in this statement. Does "their" refer to Intel or AMD. Common sense would make you assume that it means Intel's costs but that is apparently wrong.

In another report, it was stated that Intel was charged with using discount prices that forced its competition to sell below the cost of an efficient competitor. This standard is different even than AMD's costs

It was pretty clear that this was the theory of AMD and the European Commission bought the standard. The efficient competitor standard would not allow the counter attack that AMD (the primary competitor) had horrible yields and high costs.

The only standard that has ever had legal significance in the reality world is when a company sells below *its* cost. If this is done by an importer dumping may be the legal problem. If it is done by a company with market power to harm a competitor then it raises antitrust issues.

The cost defintion is an area of big contention even when looking at an actual company. Does cost mean marginal cost? Marginal cost plus share of other expenses? What is included in other expenses?

When you try to determine the cost structure for an imaginary compny the whole inquiry is a total free for all. AMD can contend that the costs of an "efficient competitor are whatever it wants it to mean.

Edit: Here is a report of the "efficient competitor " position of the European Commission.

http://us.ft.com/ftgateway/superpage.ft?news_id=fto072720071818006747&page=2

A spokesman for the European Commission said: "The rebates offered by Intel were of such a quantity, of such an amount, that an efficient competitor would be forced to price below cost and we think that would be very bad for competition and bad for consumers who would be buying computers."