This project was completed by Intensity. Intensity joined Secretariat on February 1, 2023.

Background

A large enterprise computer server and software company was alleged to have engaged in anticompetitive behavior, including establishing pricing and policies that blocked competitors from providing customers with support services. The alleged anticompetitive behavior included customer lock-in via economic tying, whereby customers could receive software and firmware updates only if they also purchased software support services from the original manufacturer that were priced far above competitive levels. This practice was alleged to enable the server manufacturer to block competition for hardware support by pricing the hardware services well below competitive levels. The plaintiffs in the case sought to recover damages related to the alleged anticompetitive behavior.

Our Analysis

Intensity researched and analyzed marketplaces for multiple enterprise hardware and software support services, evaluated market power within the relevant markets, and quantified lost profits to a competitive provider of the products at issue.

Intensity’s analysis included consideration of economic tying arrangements and economic lock-in. For example, Intensity evaluated the economics of access to software updates and firmware for customers to purchase support from third-party providers in addition to the server manufacturer. In this case the server manufacturer was alleged to have forced customers to purchase expensive software support services in order to gain access to the updates, and leveraged the profits to undersell competitors for hardware services.

The issues Intensity addressed include market definition, analysis of market power, economic tying arrangements, economic lock-in, lost profits, and econometric evaluation of but-for revenues.