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There's a different between getting a discount "if you buy a lot of X" and "if you don't buy any X from our competitors". The latter in anti-competitive.

arkades 9y ago
Why? I’m not being coy; I don’t understand. Isn’t “we will take less money from you if you don’t work with our competitors” one of the cornerstones of a competitive market? I’d understand if the payment went to a corporate officer to act at odds with the interests of his employer, but I guess I don’t see how this is distinct from any other contract to be a sole distributor, sole provider, etc. Certainly their competition could kill such a deal by just beating the price cut?
- Tomte 9y ago
  > Isn’t “we will take less money from you if you don’t work with our competitors” one of the cornerstones of a competitive market? No. "We take less money for our products than our competitor" is a competitive market.
- laumars 9y ago
  The difference is market share. If you have a dominant market share and do deals for exclusivity then you are preventing competition from happening.
- Tuna-Fish 9y ago
  As long as no-one has a dominant market position, such a deal is completely legal and there is nothing wrong with it. It used to be legal regardless of your market share, but during the tail end of the Gilded age, we learned the hard way that once someone gets big enough that they can kill the business of their customers/suppliers by refusing to sell to/buy from them, they can stop playing by the rules of a free market where they compete with others to provide a better product or service at a cheaper price, and instead entrench themself as a permanent monopoly that gets monopoly rents and does not have to fairly compete. So, antitrust laws were born, which limit the kind of actions you can take if you have a commanding market position.
- tylerhou 9y ago
  There was a clawback clause associated with the discount: > The agreement made clear that Qualcomm would cease these payments, if Apple commercially launched a device with a chipset supplied by a rival. Furthermore, for most of the time the agreement was in place, Apple would have had to return to Qualcomm a large part of the payments it had received in the past, if it decided to switch suppliers. This meant that Qualcomm's rivals were denied the possibility to compete effectively for Apple's significant business, no matter how good their products were. They were also denied business opportunities with other customers that could have followed from securing Apple as a customer.
- zAy0LfpBZLC8mAC 9y ago
  Well, if there weren't any difference, why would Qualcomm put it in the contract? Also, no, there are many reasons why the competition couldn't beat them. Be it that Qualcomm is selling at a loss, simply to kill the competition, or be it that the competition can only supply a smaller amount than the buyer needs, but at a lower price. In a competitive market, that smaller supplier could earn money to gradually grow, but the headstart of the established supplier can be used to keep the smaller supplier unable to ever sell.

arkades 9y ago

Why? I’m not being coy; I don’t understand. Isn’t “we will take less money from you if you don’t work with our competitors” one of the cornerstones of a competitive market? I’d understand if the payment went to a corporate officer to act at odds with the interests of his employer, but I guess I don’t see how this is distinct from any other contract to be a sole distributor, sole provider, etc. Certainly their competition could kill such a deal by just beating the price cut?

Tomte 9y ago
> Isn’t “we will take less money from you if you don’t work with our competitors” one of the cornerstones of a competitive market? No. "We take less money for our products than our competitor" is a competitive market.
laumars 9y ago
The difference is market share. If you have a dominant market share and do deals for exclusivity then you are preventing competition from happening.
Tuna-Fish 9y ago
As long as no-one has a dominant market position, such a deal is completely legal and there is nothing wrong with it. It used to be legal regardless of your market share, but during the tail end of the Gilded age, we learned the hard way that once someone gets big enough that they can kill the business of their customers/suppliers by refusing to sell to/buy from them, they can stop playing by the rules of a free market where they compete with others to provide a better product or service at a cheaper price, and instead entrench themself as a permanent monopoly that gets monopoly rents and does not have to fairly compete. So, antitrust laws were born, which limit the kind of actions you can take if you have a commanding market position.
tylerhou 9y ago
There was a clawback clause associated with the discount: > The agreement made clear that Qualcomm would cease these payments, if Apple commercially launched a device with a chipset supplied by a rival. Furthermore, for most of the time the agreement was in place, Apple would have had to return to Qualcomm a large part of the payments it had received in the past, if it decided to switch suppliers. This meant that Qualcomm's rivals were denied the possibility to compete effectively for Apple's significant business, no matter how good their products were. They were also denied business opportunities with other customers that could have followed from securing Apple as a customer.
zAy0LfpBZLC8mAC 9y ago
Well, if there weren't any difference, why would Qualcomm put it in the contract? Also, no, there are many reasons why the competition couldn't beat them. Be it that Qualcomm is selling at a loss, simply to kill the competition, or be it that the competition can only supply a smaller amount than the buyer needs, but at a lower price. In a competitive market, that smaller supplier could earn money to gradually grow, but the headstart of the established supplier can be used to keep the smaller supplier unable to ever sell.