05.17
EU Moving On To Intel. Done With Microsoft
So, evidently the EU has squeezed every bit of blood out of Microsoft that they can, and now they’re moving on to Intel. Just in case you haven’t been keeping up with all the EU anti-trust shenanigans going on over the last decade, let me catch you up. The EU has been demanding all sorts of insane mandates from Microsoft. They required them to release an EU-only version of Vista that didn’t have Windows Media Player embedded, and a version of Windows XP that allowed Internet Explorer to be uninstalled. This is all on top of the 497 million dollar fine they hit them with in 2004. It all stems from their anti-monopoly case against Microsoft back in the late 90’s. Well, this past week we heard that they’ve evidently tired of Microsoft and now hit Intel with a record crushing 1 billion dollar fine. Here’s the money quote:
Intel Corp., accused by the European Union of giving computer sellers rebates to exclude a rival’s chips, may be ordered to stop the discounts and pay a record antitrust fine of more than 1 billion euros ($1.36 billion).
The European Commission will rule this week on charges that Intel impeded competition and harmed consumers by muscling out Advanced Micro Devices Inc. from the chip market. The penalty could double the record 497 million-euro fine against Microsoft Corp. in 2004 for abusing its monopoly in personal computer operating systems, said Thomas Graf, an antitrust lawyer at Cleary, Gottlieb, Steen & Hamilton LLP in Brussels.
When the U.S. government under Clinton started hammering Microsoft everyone just shook their heads and said here we go again. Then the EU started in on them and everyone kinda just stared in disbelief as they were hit with fine after fine and penalty after penalty. But, this fine against Intel is outright criminal. This goes so far over the line that the U.S. government should get involved immediately and shield Intel. Think I’m overreacting? Try these numbers on for size. Intel has 48,000 employees. That fine represents $20,000 per employee. Intel’s total income in 2008 was 5.3 billion. That single fine represents over 20% of their annual income. In what warped, insane world could that be justified? This just makes me furious.
Let’s look at what they are accused of for a moment. The story says they are “accused by the European Union of giving computer sellers rebates to exclude a rival’s chips.” Let me ask you something. Why is this bad? What is so immoral about giving a distributor a financial incentive to favor your product over a rival? That’s called business. If AMD can’t keep up and offer the same pricing then they deserve to be in second place. Stop the whining. AMD can never, ever claim to be a victim of Intel again. In 1999 AMD pulled off the impossible and made a chip that didn’t just match Intel’s Pentium chip, it beat it. AMD went from red-headed step child to king within one release cycle. They gained significant market share away from Intel over the next few years. Especially in the business desktop and gaming markets. And they did it all at a time when Intel was supposedly indestructable, and couldn’t be beat. At that time, AMD was woefully outgunned by Intel financially, but they pulled it off with hard work and business savvy. I’m sorry AMD. Stop whining and start making better chips.
Imagine you own a restaurant and you serve the best breakfast in town. You’ve been in business for a really long time and everybody loves your food and you’ve become something of a landmark. Then one year, someone opens up a breakfast joint down the street. They’ve managed to get some really good recipes and they also serve it at a better price. All of a sudden you start losing customers. Sure, you won’t lose them all because of brand loyalty, but it’s really starting to bother you. You realize that over time you got complacent and let your service and portion size slide. So you decide to hunker down and beat this new guy. You put out coupons in the paper, and advertise that Monday, Wednesday and Friday, kids will eat free. You have a lot of cash reserves and you can afford to cut your profit margin a little. This is exactly what happened to Intel. When AMD introduced that original Athlon processor back in ’99, it shocked the pants off Intel. They realized they had become complacent, and they rightly decided to take the gloves off and come at AMD with everything they had.
Again, this is business. Intel has a better chip than AMD now, but the only problem they have is that AMD has always been able to undercut them on price. They decided to try and even the playing field by offering rebates to distributors to get their chips to be preffered at a comparable price level. I have absolutely no hope that the Feds will step in and protect Intel, but it’s immoral for them not to. In the microchip business, you can’t cut wages for your engineers and you can’t cut much management because those people would leave and go to a competitor. The people that will be layed off or get pay cuts will be, as always, the little guy. The janitors. The clerks. The marketing guys. The EU is a thief, and they’re just using anti-trust laws as cover for their robbery.
For a really good overview of the farce of anti-trust law, listen to Thomas DiLorenzo’s lecture on Monopoly and Competition and then follow it up with his excellent Protectionist Origins of Anti-Trust below:
Monopoly and Competition:
Protectionist Origins of Anti-Trust:
