Anti-trust: Chips & Chickens

Anti-trust and chips:

The Justice Department must be worried about having time on its hands after the Microsoft case winds down: It has cooked up a big new grand-jury investigation of the chip industry. One problem, though, is that no one can figure out what the beef is: Are chip prices too high or too low? Both conditions have prevailed lately in the volatile, commodity-like business of cranking out dynamic random access memory chips, the french fries of the computer economy. As someone quipped, if the companies are fixing prices, you'd think they'd do a better job of it.

Oh well, there will be plenty of time to find a crime later. Let's get the investigation rolling. Meanwhile, the FTC can't afford to let its cousin get all the headlines. It has inserted itself in what had been a purely private dispute between Rambus, a U.S. chip designer, and several of its customers, large overseas chipmakers who complain that Rambus patented technology they had developed jointly.

And chickens:

Just because a contract is unusual or exclusive doesn't mean it hampers competition. The important question is whether competition existed before the contract. The unusual terms may provide a way to avoid enforcement problems.

Consider Chicken Delight, a franchise operation that was the subject of a 1971 antitrust case. Instead of collecting a percentage of store revenue, Chicken Delight required franchisees to buy all supplies from the parent company. From a transaction-cost perspective, this was an elegant solution to a basic problem: in a cash business, it is easy to lie about sales.