European Antitrust Ruling on Intel Threatens Future of Innovation

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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