Monopoly

I wanted to comment on this story yesterday but somehow didn’t get around to it. The EU has imposed a whopping $1.45 billion fine on Intel:

BRUSSELS –

The European Union fined Intel Corp. a record euro1.06 billion ($1.45 billion) on Wednesday and ordered the world’s biggest maker of computer chips to stop illegal sales tactics that shut out Silicon Valley rival AMD.

The fine, which exceeded a euro899 million monopoly abuse penalty imposed on Microsoft Corp. last year, was denounced by Intel, which plans to appeal to an EU court within 60 days.

AMD’s stock jumped in midday trading Wednesday, while Intel shares were up slightly.

“Given that Intel has harmed millions of European consumers by deliberately acting to keep competitors out of the market for over five years, the size of the fine should come as no surprise,” said EU Competition Commissioner Neelie Kroes.

“Intel did not compete fairly, frustrating innovation and reducing consumer welfare in the process,” she said.

The European Commission also told Intel to immediately cease some sales practices in Europe, though it refused to say what those were. Intel said it was “mystified” about what it was supposed to change but would comply with the “extremely ambiguous” EU order.

“This is really just a matter of competition at work, which is something I think we all want to see, versus something nefarious,” said Intel’s CEO, Paul Otellini.

The editorial this morning in the Wall Street Journal reflects the same fun house mirror distortions of reality that Mr. Otellini’s remarks do:

Intel has been able to sell enough chips cheaply enough to maintain an overall market share that has hovered between 75% and 80% for years. And those lower prices help drive down the price of a computer, which is good for consumers. A less competitive market for chips, or one in which Intel is barred from offering discounts to its biggest customers, would mean higher consumer prices. The Commission also suggests that Intel may have sold some chips below its cost, but Intel denies this and claims it can prove it if the Commission would deign to consider its evidence.

The actual evidence brought out in the European case against Intel included documents from Intel in which Intel strong-armed European computer manufacturers into selling the products of competitors only to specific customers, avoiding the products of competitors, or delaying the release of products based on its competitors’ products, all clearly aimed at reducing competition. In Intel’s Humpty Dumpty world less competition means more competitive.

It is the insidious nature of monopolists exploiting their monopoly powers to maintain or extend their monopolies that we will never know how much consumers have been harmed. We can’t know what prices might have been or what products might have been developed. We can’t know what competitors were never allowed to arise. We can’t know what Intel or Microsoft never brought to the market because they never felt the need to.

I support the Obama Administration’s decision to enforce antitrust laws more vigorously. It’s something we should have been doing all along.