Focus Areas:    Populist Antitrust

US Antitrust Becomes More European

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Last week the European Commission slapped Intel Corporation with the largest antitrust fine in the Commission’s history, announcing that the sanctions were necessary to protect consumers from the egregious abuses of a “dominant firm.” What did Intel do to merit this sanction? Whatever its intentions were, its actions leading up to the fine resulted inarguably in lower prices for consumers.

The antitrust theory of the complaint against Intel , packaged and sold by its chief rival AMD to antitrust regulators in Europe, South Korea and Japan, and being pushed in the U.S., is that the discounts offered by Intel are so low that AMD will not be able to compete, and consumers will face higher prices sometime in the future.

In the meantime, what’s going on in the market for microprocessors when Intel is offering these loyalty discounts to its customers? Exactly what one would expect from a market in which vigorous competition was present: innovation is up and prices are down. Oh, and by the way, the complaining rival’s profits have soared.

The problem of determining whether Intel’s conduct amounts to harmful abuse of dominance or simply vigorous competition is at the heart of the antitrust enterprise today. Unfortunately, not only the European Commission, but also the U.S. enforcement agencies, are on a path to ensure that they get the answer wrong.

If AMD’s efforts sound like a standard move for a company trying to keep up with its more efficient and competitive rival (think IBM vs. Microsoft, Microsoft vs. Google), you’re right. But several regulators around the world, nudged by AMD, have been willing to sacrifice the sure thing represented by Intel’s lower prices today, on the theory that we might see some speculative harm down the road when and if AMD is excluded from the marketplace.

Some have described the European approach to antitrust as a form of protectionism aimed at large and successful U.S. firms like Microsoft, Intel and Qualcomm . Others have tried to rationalize the more interventionist approach as relying on a new brand of “Post-Chicago” economics.

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