The Wall Street Journal -- misguided defender of the rich and powerful. My comments in italics.
Intel in Euro-Land
July 31, 2007; Page A14
Computer chips are getting faster and smaller, and prices are dropping amid fierce competition. So naturally the European Commission thinks this is the ideal time to lodge another antitrust suit against another American technology titan. WSJ tries to fan jingoistic zeal even though Intel is no more an American company than is AMD.
Last Friday, EU regulators accused Intel Corp. of offering computer makers -- brace yourself -- rebates designed to harm rival Advanced Micro Devices, or AMD, in the chip market.
Obviously, they want you to think that rebates are always good for the consumer, and therefore the EU is discriminating against the "benevolent Intel." Would the WSJ defend Microsoft if they told IBM they could have Windows for free if they stopped installing Linux on servers? Would the WSJ defend Walmart if they sold food at half price in towns that only had "Mom & Pop" grocery stores within 20 miles. That's even more pro-sumer, right? The 50% rebates would go directly to consumers! And then, after all the competition folds, they triple prices.
In Brussels jargon, that's an "abuse of a dominant position" and could lead to a fine of as much as 10% of Intel's annual global turnover, or perhaps €3.5 billion.
Subtely, trying to play the anti-Europe card again. There's nothing "Brusselian" about "abuse of a dominant position. But more important, the WSJ has not explained the exclusionary nature of Intel's rebates, at all.
As with its continuing case against Microsoft, the Commission isn't responding to gripes from customers or consumers. Neither AMD nor Intel sells to consumers, how would they know if prices are not dropping as fast as they should be? The investigations were prompted by AMD, which has launched legal proceedings around the world against its archrival. This regulatory forum shopping includes a pending lawsuit in a federal court in Delaware filed two years ago. "Regulatory forum shopping? The JFTC "raids" against Intel occurred 14 months before AMD filed its suit. AMD did not file a lawsuit in Japan until after the JFTC found Intel guilty. So, except in the US, which has incompetent anti-trust enforcement anyway, it is the EU and the JFTC that have "initiated legal proceedings."
In Europe, a firm's size and success are the determining factors of its alleged violations. This is a BLATANT lie. The size and market share are a necessary condition, not a sufficient condition, for enforcement of anti-trust law. DUH, do they think we are idiots? The same commercial practices would be entirely legal if the company in question were not considered "dominant." "The same commercial practices" would be counterproductive if followed by AMD. 100% strawman. Does the WSJ really want to reject all anti-trust law and say that "dominant position" is irrelevant? If they want to change the law back to the dawn of the 20th century, fine, but let's be clear that they don't want to enforce laws that exist if they consider "dominant position" as being irelevant! This leaves companies in the absurd position of being free to compete as hard as possible until they reach a certain market share -- at which point their hitherto legal behavior becomes unlawful. This is the kind of reasoning that has damaged the Commission's credibility, as Europe's highest courts overturn one major antitrust decision after another. First of all, in practice, Intel's exclusionary rebate schemes would never happen from AMD. They would be counterproductive. Suppose AMD told HP -- "use our CPU's exclusively, and you'll get a 10% rebate." In practice, they couldn't make that many CPUs, so they could never make the offer. If it were a smaller OEM, they'd risk the larger ones retaliating. So this is another strawman argument. As non-intuitive as it may sound, there is sound legal justification for treating a dominant company different than a smaller company. The small company is in no danger of making the larger one go out of business, and then raising prices. The the dominant competitor, however, this is obviously a possibility. Therefore, we have anti-trust law.
In Intel's case, Brussels claims to be acting for consumers. "The rebates offered by Intel were of such a quantity, of such an amount, that an efficient competitor would be forced to price below cost and we think that would be very bad for competition and bad for consumers who would be buying computers," says a Commission spokesman. Lying again. AMD's suit and the EU's argument has nothing to do with the size of the rebates, but the conditions for the rebates. If Intel fails to persuade the Commission to drop its charges, it will be forced to stop its "anti-competitive" behavior; that is, it will have to discontinue the rebates and raise prices. A lie again. Intel can keep rebates, it can lower prices, it just has to make them not depend on the percentage of CPUs a customer buys from Intel. Where is the economic analysis that shows that the total rebates will be lower, or the prices higher?
Presumably, the harm to consumers is that the rival's potentially superior products are muscled out of the market. Absolutely not. The harm to consumers is that the lower price competitor's products are muscled out of the market. "In a worst case the rebates may even force the competitor to give up altogether, allowing the remaining player to establish a monopoly." But such a scenario runs counter to the history and very essence of the IT business, which remains competitive, dynamic -- and unpredictable. It hasn't happened yet, therefore it can't happen. WRONG! It HAS happened. Anyone at the WSJ notice how much higher DELL's prices were when they didn't sell any AMD? With 80% of current market share, Intel's dominance is indisputable.
But with about 20% of the $33 billion market for microprocessors, AMD is hardly a push-over. Factual error -- AMD has no where's near 20%. The company's ups and downs -- it gained share in 2005 and most of 2006 before suffering a downturn late last year -- seem to contradict its allegations of Intel's anti-competitive behavior. A reasonable conclusion is that AMD's fortunes correspond more closely to its own innovation rate than to any rebate scheme by a rival. Similarly, Intel's recent comeback was due to its competitive products, chips that increase performance but lower energy consumption. Anyone with a brain knows that AMD needs both competitive products AND a level playing field to prosper. One could also argue that AMD's performance advantage over Intel was deeper and lasted longer than the last 15 months, but the "non-level playing field" resulted in a much more rapid Intel recovery from the small market share losses they previously experience. "Lower energy consumption" -- this is Intel fanboi stuff. Not on a system basis, and AMD is about to retake the lead.
The case against Intel is the latest in a series of EU assaults on successful U.S. technology companies. RAH, RAH, RAH Brussels apparently is determined that if Europe can't be a global leader in information technology it can at least become that industry's world-wide regulator. If it succeeds, the world is bound to be a less competitive and innovative place -- like, well, Europe. They trying to convince Rush Limbaugh?
online.wsj.com
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