Intel’s “Rebates” and Other Ways it “Helped” Customers

Group 3: Summer Doak, Tammy Dunham, Sara Wittrock, Rafael Alvis, Leslie Wiggins, and Emily Ramsey

1) 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 a large portion of the market? Explain your answers.

I – use We believe Intel is considered a monopoly even though they do not control all but
the majority of the market. Pure monopoly exists when a single firm is the sole producer of
a product for which there are no close substitutes. The firm is the price maker and entry
and exits are blocked. In this case study, there was some evidence that Intel attempted to
create a monopoly. First, Intel developed and patented a new microprocessor which legally
barred AMD from making it. Then Intel used an exclusive dealing arrangement (Vasquez
220). – point a - please refer to your APA resource - note how text citation should be cited -
note when page nos. should be cited Intel negotiated a deal with Dell, a computer
manufacturer, to only purchase microprocessors from Intel and stop buying them from
AMD. This caused AMD’s sales to decrease substantially. In return, Dell received rebates
from Intel. According to Tom McCoy, executive vice president for legal affairs in AMD, a
rebate is “payment based on the number of products a customer purchases, and so are in
effect discounts that are paid after the customer buys the product” (Vasquez, 2012). – see
point a above However, the rebates Intel gave out to Dell were payments “not related to
the number of processors they bought” (Vasquez, 2012). Another way Intel used
monopoly-like power is that – was when they coded software to intentionally run slow on
AMD processors and not on Intel processors, making customers believe AMD processors
were defective.

2) In your judgment were Intel’s rebates ethical or unethical? Explain.

Without a doubt Intel operated unethically when offering rebates to their customers. In no
way is it ethical to pay someone for your business. It is dishonest and should not be allowed.
AMD was trying to come by production honestly and by building their business the way it
should be. The business plan was extremely monopolistic with unmoral standards towards
their competition - AMD. Whether it was their method of threatening other companies that
used AMD (which manipulated – their manipulation of the supply and demand curve is
viewed unethical in a free market (Vasquez, 2012) or their request of boycotting their
competitor, their actions spoke volumes when they decided to tamper AMD’s merchandise.
Intel violated AMD’s right of operating a business by offering a ‘rebate’ that in actuality was
not benefiting the consumer in any way, meanwhile crippling the value of AMD’s product
and reputation. If Intel did not have the best price at one time, then it is only fair that they
invent something else that beats out the market leader. I don’t believe Intel received the

Group 3 Case Study 4 Page 1

proper punishment from their unethical behavior in this case study. The lawsuit FTC
should have never been dropped. Unethical behavior like this with large corporations that
gets any media attention inevitably just plants negative seeds into future companies’
marketing strategies.

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

This is a very arguable subject; however, if we go by the three moral values that perfectly
competitive free markets achieve to be ethical, the answer seems clear. In such a market,
buyers and sellers exchange with one another that is just and “equal” for each party. They
maximize the amount of goods they want to allocate, and bring the achievements in such a
way that the buyer’s and sellers’ have a right to be of free consent (Vasquez, 2012) – see
point a above. As far as - for Intel, they tried their best to sell it at a competitive price. The
second value, on page 206, is that the goods and resources are efficient. This is where Intel’s
morals become cloudy. Intel created a product in an area in the economy where demand
was high. On the other hand, Intel was not being “morally ethical” to their consumer
knowing that they product they created could work with the AMD processor, but was
altered so that it didn’t. By Intel knowing and purposefully doing that, I think they were
wrong. The last moral value listed on page 207, is to establish justice and maximize utility that
respects buyers and sellers negative rights (Vasquez, 2012). This is achieved by freedom of
opportunity and voluntary exchange. Intel wasn’t forcing their buyers to by its libraries or
resource material, they – Intel just tried to persuade/bribe them – their buyers by offering
rebates or monies back. I believe this can leave a company having a pernicious effect on its
outcome of a product. By Intel’s action doing this, it left its own company to be put “under
the microscope.” Even though they priced the product lower, it still didn’t prove a viable
outcome or provide buyers with a satisfying bundle. I can think of “Ford/Pinto
Nightmares” all over again. By offering rebates, it made other companies subject to fail
such as Dell Computers. Without Intel, it would be hard for companies such as HP, Dell,
etc., to try and be a viable functioning company.

Group 3 Case Study 4 Page 2

 Reference

Vasquez, M.G. (2012) Business Ethics: Concepts and Cases. 7th Ed. Pearson
Education

Quality of Answers

Content and Organization Outstanding Above Av Average Below Points

Av or
None Earned

15 points 11.3- 15 7.6- 11.2 3.9 -6.5 0 -3.8

All key elements of the assignment are covered in a 15

substantive way.

The content is comprehensive, accurate, and/or

persuasive. Major points are stated clearly and well
supported.

Readability & Style Outstanding Above Ave Average Below

Av or
None

6 points 4.6 - 6 3.1 – 4.5 1.6 - 3 0 -1.5

Sentences are well-constructed, complete, clear, and 6

concise with logical flow of thoughts. Tone is
appropriate.

Mechanics Outstanding Above Av Average Below

Av or
None

4 points 3.1- 4 2.1 - 3 1.1- 2 0–1

Group 3 Case Study 4 Page 3

 Rules of grammar, usage and punctuation a are 3.8
followed. Spelling is correct.

Text sources (if included) are correctly cited with

reference listing.

Comments 24.8/25

Nice job, Group 3, with your early completion of your Case study Four, and with your well-
constructed answers.  Enjoy your final case study. Remember to post your group’s task delegation
from page 2 of your group contract.

Group 3 Case Study 4 Page 4