In this post I address Braden Cox’s argument that the EU missed the boat in its fining Intel today, because it didn’t focus a sufficient amount of attention on consumer welfare, choosing instead to look at the competition between Intel and AMD. What Mr. Cox fails to realize is that, even in the United States, our antitrust laws do not focus on whether consumers are better off when compared to where they were before the competition began. Instead, we focus on market power and anticompetitive conduct, because even if consumers are better off, there is no way to know if we could have been benefited even more had there been no anticompetitive behavior.

Today, the European Union announced that it would be fining Intel 1.06 billion euros ($1.44 billion) for abusing its closest rival Advanced Micro Devices. This is a case that has been in the making for a while (AMD actually first filed its U.S. complaint against Intel in June of 2005). The N.Y. Times had this to say about Intel’s activity:

The European Union’s competition commissioner, Neelie Kroes, said the penalty against Intel…was justified because the company had skewed competition and denied consumers a choice for chips.

Ms. Kroes said Intel had “used illegal anticompetitive practices to exclude its only competitor and reduce consumers’ choice — and the whole story is about consumers.” She said Intel’s practices had “undermined innovation.”

In response to the announcement, Braden Cox, a contributor at The Technology Liberation Front (anyone seen the Life of Brian?) and employee of the Association for Competitive Technology (a lobbying and publicity organization funded by Microsoft—now what is Microsoft famous for in Antitrust law?) had this to say:

The European Commission is a loose cannon when it comes to antitrust and competition law. It’s record $1.45 billion fine is emblematic of what the Commission just doesn’t get: there’s a difference, a difference that matters, between consumer and competitor harm….

No, the whole story is not about consumers, Ms. Kroes. It’s clear that the only harm that Intel has carried out is on it’s main rival AMD–and that’s called competition….

Here’s the main point–competition shouldn’t be illegal. But according to EU law, companies with a dominant position in the market have a legal duty to not eliminate competition, while in the U.S. only monopoly power imparts this duty. U.S. culture, reflected (partially) in antitrust law, holds that the competitive process of driving other companies out of business makes an economy efficient and innovative.

Mr. Cox is correct that U.S. antitrust law in this area requires a company to have the power to control prices or exclude competition from the market (i.e. monopoly power), but it also requires the willful acquisition or maintenance of that monopoly. In other words, in America we allow natural monopolies created by superior skill, foresight, or industry. That, however, is not what AMD accused Intel of, nor what the European Union found that it had done. I’m not going to get into the arguments here, but it is sufficient to reiterate that the EU found that Intel used anticompetitive practices to exclude a rival from the market.

Mr. Cox attempts to hide behind his colleague Mark Blafkin’s (the Director of Communications for ACT, and incidentally not a lawyer) arguments that Intel’s actions didn’t actually harm consumers because “innovation is thriving,” “computing power continues to increase,” “prices have fallen,” and “when AMD innovates, it gains market share.” However, none of those things matter. I’ve tried for years to gain the ability to tell the future, but it’s never happened. Similarly, I’d love to know what would happen if I took another path when the “two roads diverged in a yellow wood.” That hasn’t happened either. If Intel hadn’t engaged in anticompetitive tactics, who knows what innovations might have been developed or how low costs may have fallen. True, consumers are better off than they were five years ago, but could they have been better off? It is these questions that lead us not to focus on consumer welfare directly, but rather, as the EU did, to focus on the anticompetitive acts and conduct that we believe lead to market harm.

Cross Posted from The Spontaneous Huddle

Litigation, Media, Technology