Intel, Almunia and 1 billion euros for unfair potatoes

Intel Logo

“The General Court upholds the fine of 1.06 billion euros ($ 1.4 billions) imposed on Intel for having abused its dominant position on the market for x86 central processing units between 2002 and 2007”. With these words the judge of the General Court of the European Union dismissed Intel’s action against the decision of the Commission in its entirety last week. The record fine closed a long antitrust question between the US microchip giant and the European Commission.

Let’s see now how the American giant played an unfair game in the European market. With a decision taken on 13 May 2009 the Commission imposed a fine of €1.06 billion on Intel, the American microchip manufacturer, for having abused its dominant position on the market for x86 CPUs, in infringement of the competition rules of the EU and the European Economic Area (EEA), the court explained in a press release.

Europe fined Intel, which had a market share of around 70 percent in 2009, for impeding AMD’s ability to compete between October 2002 and October 2007. The European Commission argued that Intel acted in an ‘unfair’ way “by implementing a strategy aimed at foreclosing from the market its only serious competitor, Advanced Micro Devices, Inc.”. Intel was basically awarding rebates to computer makers like Dell and HP, if they bought exclusively or mostly Intel-made CPUs, the most important bit of the computer you are reading this article through. The Commission considered that Intel was in a dominant position and that it was extremely difficult for competitors to enter the market and to expand.

Allegedly Intel also made payments to computer makers (HP, Acer and Lenovo), if they agreed to postpone or cancel the launch of computers that contained CPUs made by AMD, and/or putting restrictions on the distribution of those products, EU officials claimed. Intel has argued that it was not working outside the frames of the law and said to Reuters that “it’s a complex case” that cannot be broken down that easily. Intel, through the voice of its spokeswoman Sophie Jacobs, declared that there’s big “disappointment with the decision”. “None of the arguments raised by Intel supports the conclusion that the fine imposed is disproportionate,” the Court replied, given also that DG Competition fines for anti-trust violations can reach a maximum of 10 percent of a company’s annual turnover, if that is found ‘guilty’. For Intel, the penalty was equivalent to 4.8 percent of the company’s 2008 turnover. So they should be happy already.

The Commission openly welcomed the outcome last week and so did BEUC, the European Consumer Organisation (BEUC stands for French “Bureau Européen des Unions de Consommateurs”). Monique Goyens, BEUC’s Director General commented: “When large companies abuse their dominance of the market, it causes direct harm to consumers. The Court’s ruling issued a strong reminder that such behaviour is illegal and unacceptable. Antitrust actions can help clean the market and this record fine should serve as an expensive deterrent against companies abusing oversized market shares”, BEUC reported.

Intel’s fine remains the largest ever for breaching Europe’s competition laws. The European Commission has been thoroughly monitoring the technology industry. It has already launched antitrust cases against Google and Microsoft, and continues to say that it will “police the technology industry where necessary”. Silicon Valley is trembling not without a reason.

There are always two ways to look at it though. This might be seen as a fight between the ‘free market’ in which a company does everything possible to gain market share and a watchdog which tries to keep the market controlled. However, what should be well considered is that Intel was not found ‘innocent’ for a good reason; the Californian company actually tried to control the market itself, not being the ‘free market’ champion, again, but  the one that wanted to control the market in a ‘monopolistic’ manner. Some say that DG Competition has not accurately considered the economic effects of Intel’s decision through the years, but the truth is that when there is evidence of a long term ‘unfair’ strategy, a market is no longer free and authorities are called to draw the line. This is not Europe’s innovative breakthrough but every free market’s role in the world.

The question many are asking is whether 1 billion euros is too much a fine. Or too low maybe? BEUC’s Monique Goyens last week probably introduced the most important aspect for this kind of questions: “Consumers harmed by Intel’s long-lasting misconduct were left out of any compensation”. Are consumers truly free when several years later an antitrust case is proved to have been influencing the market and its terms?

It’s easy to forget that the most important thing in a market which can call itself “free” is not only the freedom of an entrepreneurial mind to make ambitious business plans without asking his mom but also equally important is the freedom of choice of the consumer of the market. Europe has long been a champion in protecting its consumers by setting high standards and instead of everyone attacking Almunia and his team maybe they need to be more transparent and fair in their price strategies and business development plans.

Everyone if free to conquer the world market with chips or potatoes against competitors but only in a way that does not kill the market. Good competition ethics by giants like Intel, Microsoft and Google is a must in Europe. Only like that products can be of the highest standards, the price as low as possible and only then the consumer will be able to do the impossible, make a rational purchase decision. At least she will try.

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