Intel is the world?s biggest computer chipmaker by far, but Advanced Micro Devices has been its main rival for some time. Following an antitrust complaint filed by the latter, European Union regulators have charged Intel with using illegal rebates to thwart competitors and fined it $1.45 billion. This is the largest ever fine of its type and it signals a gathering tide of antitrust challenges rising up against the technology industry on both sides of the Atlantic.
Bill Gates, however often he proved prescient, got it quite wrong when he said?around a decade ago?that ?this antirust thing will blow over?. Maybe that was just wishful thinking in the face of the European Commission?s aggressive probe into Microsoft dominance. Not to mention the US justice department?s probe into whether the company had abused monopoly power by bundling its Internet Explorer software with its Windows operating system, thus unfairly restricting the market for competing browsers. While this case was relatively amicably settled?with the US domestic environment being averse to government intrusion in industry, the European regulators concluded the company was guilty of freezing out rivals in server software and other products, and fined it $690 million.
The Commission?s Intel judgment is similar in spirit: the accused has abused its market dominance. First, Intel offered rebates and payments that effectively prevented customers from choosing alternative products. Second, it made direct payments to computer manufacturers to halt or delay the launch of specific products containing competitors? chips, undermining competition. Both practices, in the end, have been hurtful to consumers? interests.
Critics of the decision say that discovering antitrust is like discovering pornography: it?s subjective. After all, discounts and rebates are common across various business communities.
CEO Paul Otellini remains unapologetic about offering bigger discounts to bigger buyers: ?Nothing new there!? Intel, which will appeal the Commission?s decision, also argues that the industry hasn?t been showing any signs of stagnation, as it continues to innovate, as chip prices continue to fall and as rival AMD seems to be keeping good health. It is indeed true case that in the first quarter of this year, Intel?s share of all microprocessor units shipped went down by 4.7% to 77.3%. While AMD gained 4.6% to reach 22.3% of the market.
The more populist American argument, echoed by Intel chairman Craig Barrett in a recent conversation with a CNBC correspondent, of course goes as follows: ?At a time when the world is at great competition for its economic future, at a time when we brought 3 billion new capitalists in India, China, Russia, into the free economic system, to have government regulators say, You shouldn?t compete? What are they thinking??
But this argument worked better during the Bush era, which saw the theory of markets being self-correcting on the ascendant and which was wary of taking on big companies unless they ?disproportionately? harmed consumers. In a new world where Americans are more comfortable with a government hand at the wheel, the standards are shifting. Christine Varney, who is the new head of the Justice Department?s antitrust division and who had earlier worked for Netscape in its antirust battle against Microsoft, has indicated she will be leading a more aggressive charge against antitrust violations than her predecessors. In short, there is a perfect storm brewing for the technology industry, with the US government and the European Commission?which has set the benchmark for tough standards?set to march in tandem.
But antitrust battles of the future will go beyond archetypical David-Goliath ones. Witness the Microsoft investment in T3, a small vendor of mainframe-like computers, which is charging IBM with refusing to license mainframe software to its customers. The Microsoft lobby has also helped nix a Google ad deal with Yahoo. Google, in turn, has complained that the searching tool built into Vista stymies its own search programme. Therefore, a prediction: Intel?s $1.45 billion fine will soon seem like a pittance in the face of new ones.
?renuka.bisht@expressindia.com