EU fines Intel for being successful

By Oregon Small Business Association,

According to the New York Times, the European Commission’s recent antitrust ruling and record $1.45 billion fine of the chip maker was misguided and mistaken and anti-competition. “By any reasonable application of a consumer-harm test, the antitrust claim that Intel is driving down prices—and so making computers less expensive—would be laughed out of U.S. court. The only harm here is to a competitor that can’t match Intel’s prices.”Intel CEO Paul Otellini responded that the decision was wrong, that there had been no harm to consumers, and that it would appeal the decision.”This is really just a matter of competition at work, which is something I think we all want to see, versus something nefarious,” Otellini said on a conference call with reporters.

The fine against Intel represents a huge victory for Intel’s rival, AMD, the number two supplier of microprocessors to PC makers. AMD has sued Intel and lobbied regulators around the world complaining that Intel was penalizing PC makers in both the U.S. and abroad for doing business with AMD

AMD has also filed a U.S. lawsuit against Intel, which is set to be heard in court in 2010.
Unlike other parts of the PC industry that consist of many competitors, microprocessors come from only two sources, according to The Oregonian. Intel has about 80 percent of the market, and AMD has the remainder, which means an order for one is a lost order for the other.

According to The New York Times, “The Commission’s complaint amounts to little more than a whinge that Intel won more of this business than the Commission would prefer.”

“The decision simply ignores the reality that the microprocessor market is highly competitive, that prices continue to decline and that performance and capacity continue to improve; all to the benefit of customers and consumers,” said Intel spokesman Bill MacKenzie in an interview with The Portland Business Journal.

Some analysts are predicting that the decision could discourage the continuous price-cutting in semiconductors that has, for decades, delivered ever-better and ever-cheaper computers.

Ken Ferree, president of the Progress and Freedom Foundation, cautioned U.S. regulators from following in the EC’s footsteps.

“If you love jobs and economic growth, you have to love the companies that drive the economy and create employment demand,” Ferree said according to “As U.S. policymakers review the EC decision, they should think carefully before adopting a competition policy that handicaps the very companies that are the key to sustaining this country’s long-term economic health.  Decisions like this do nothing to illuminate the path to a vibrant and growing economy, but rather obscure it.”

The EC ruling and further actions in the U.S. are not likely to produce substantive change in the processor market or result in AMD surging in sales or market share. Analysts say the EC’s 2004 ruling against Microsoft for anti-competitive practices did not result in a significant shift in rivals’ market share.

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