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European Antitrust Ruling on Intel Threatens Future of Innovation

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Washington, D.C., May 12, 2009—European Union authorities are reportedly on the verge of announcing that Intel has been found guilty of abusing its dominant market position by practicing so called “predatory pricing” (selling below cost) and offering substantial rebates to retain market share and undermine Advanced Micro Devices (AMD), its archrival in the microprocessor industry. Advance reports suggest that the fine could exceed US$1 billion.

“The EU should not rejoice at this seeming triumph over American big business,” said Wayne Crews, Vice President for Policy at the Competitive Enterprise Institute. “Instead, it should ponder if its policies actually make Europe hospitable for innovation. Reforms are needed if Europe really wants to sustain a competitive, knowledge-based economy, and not merely the most regulated one. Imposing billions of dollars of fines on the most conspicuous wealth creators is not the way to go.” 

“The microprocessor business has been a poster child for vibrant competition for several years,” said Ryan Radia, Information Policy Analyst. “Especially since Intel unveiled its Core microarchitecture in 2006 to compete with AMD’s K8 series, consumers have benefited from an intense and prolonged price war that shows no signs of letting up. Despite Intel’s successes in the desktop processor marketplace, Intel faces an uphill battle in the mobile phone processor market, where AMD and Samsung are far ahead.” 

“Predatory pricing is an old scarecrow of antitrust enforcement,” said Crews. “Empirical research has shown that as far back as the Standard Oil case in the early 20th century, most instances of alleged ‘predatory pricing’ have actually been cases of superior efficiency. Nevertheless, the European Union’s competition authorities have concluded that Intel has engaged in exactly this form of irrational behavior.” 

“Antitrust regulation in the new economy is a new face of the old ‘industrial policy,’ allowing bureaucrats to manipulate economic outcomes and favor companies dearer to them than consumer choice,” said Radia. “European competition law in particular allows policymakers to intervene at will, increasing uncertainty, damaging wealth creation and consumer well-being.” 

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