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The Europeans Punish Success, Again

May 13th, 2009 by Galileo Blogs · 9 Comments · Business, Foreign Affairs

The European antitrust regulator has just announced it will fine Intel Corporation $1.44 billion (1.06 billion euros) because it “harmed millions of European consumers by deliberately acting to keep competitors out of the market for computer chips for many years.” It did this, essentially, by discounting the price it sold chips to stores that agreed to sell computers containing them in bulk through exclusive agreements.

We’ve been down this path before. The railroads that served Standard Oil charged him a lower rate because Rockefeller could guarantee large, steady shipments of oil, which the railroads could ship more cheaply. For providing the railroads with product in a way that reduced their costs, and being charged less for providing that, Rockefeller was prosecuted.

In the same manner, a retail store that can guarantee large, steady sales of computers containing Intel chips is more valuable to Intel than a store that buys some of its chips and some of its competitor’s chips. Intel can afford to provide a discount.

Those never-to-be-denied European customers benefit from this by getting cheaper Intel chips, yet they were supposedly harmed according to the European antitrust commissioner.

But also evaded by the European antitrust commissioner is that a market for computer chips would not exist at all if Intel did not invent, develop, and constantly innovate the chips that become the brains of computers. Because of Intel’s work, each year the chips are faster and smarter. Each computer sold with those chips can do more — faster processing of material from the Internet, simultaneous handling of video and audio, and numerous other tasks — because of the relentless intellectual effort of Intel’s scientists and engineers.

That is part of what the never-to-be-denied European consumers and all others who buy Intel chips are getting.

To steal $1.44 billion from Intel is to demand that these scientists and engineers work for free. It is to steal the fruit of their effort, which we all benefit from by voluntarily buying their products that they create. As their property created by their minds, they have the right to set the terms under which we gladly buy these products, which we buy because of the great benefits they offer us.

Into all this steps the punishing European antitrust commissioner. She violates Intel’s property rights and the rights of Intel’s customers to do business with Intel on mutually agreed-upon terms. And by so doing, she ensures that Intel has $1.44 billion less in which to reward the efforts of those scientists and engineers who create the marvelous Intel chips.

If our computers are a little slower than they could be and our freedoms more diminished, thank Neelie Kroes, the European antitrust commissioner, and the legions of apologist economists who rationalize the pernicious doctrine of antitrust that gives her this power.

9 Comments so far ↓

  • Two--Four

    […] Union extorts nearly $1.5b from Intel. The New Clarion hits the story so I don’t have to. I would only add, to AMD: eat a bag of dicks, creeps. You’ll […]

  • Mike

    Just letting you know: INTEL does not stand for “intelligence.” It is a shortening of the company’s previous name, INTegrated ELectronics. 🙂 The company switched to that from their original founder-based name, Moore Noyce, because the latter sounded like “More Noise” when spoken.

  • Galileo Blogs

    Thanks, Mike. I removed that erroneous reference from the post. [I had mistakenly said that Intel stands for “intelligence.” It does stand for intelligence metaphorically, just not literally.]

  • Harold

    “harmed millions of European consumers by deliberately acting to keep competitors out of the market for computer chips for many years”

    Notice the package dealing. Apparently there’s no difference between *competitive* actions between consenting parties and physical force (or fraud).

    More on Standard Oil:

  • Amit Ghate

    Nice post Galileo! (The sad part of all these stories is that often it’s other businesses lobbying for these interventions and fines — never thinking about the underlying principles involved or their future repercussions.)

  • L-C

    Nevermind government companies with an actual mandate to use force against its “customers” and competitors.

    In fact, just today I was harassed about our TV license, a mandatory fee that funds public networks, touted in an Orwellian manner as “free”.

    But in their world, using force to compel people to buy your stuff is moral whereas dealing with them based on mutual respect and interest is not.

  • Galileo Blogs

    You are so right that it is businessmen who cudgel each other using antitrust. The most absurd example of that recently was Google and Microsoft in separate instances pummeling the other with antitrust. What an example of how antitrust is in no one’s self-interest. They only achieve their mutual self-destruction. I called out Google for attacking Microsoft in “This Is Not Capitalism” here:

    And I called out Microsoft for attacking Google in “Antitrust Smackdown” here:

  • Galileo Blogs

    You are correct: force versus voluntary agreement is the key issue. Ayn Rand has written about it so well when she explains how capitalism differs from government compulsion. A businessman can only persuade someone to buy a product by offering something valuable that the purchaser wants to buy. A bureaucrat, on the other hand, orders people to do things under threat of force.

    Confusion over “monopoly” is based on confusion over this issue. A business’s large earned market share is not a “monopoly” in the sense that the coercive postal service (here in the U.S.) is, or the way public utilities are. The latter operate under legally-sanctioned exclusive geographical franchises. Those are true monopolies.

  • Galileo Blogs

    I want to add a little bit to my sentence that reads: “To steal $1.44 billion from Intel is to demand that these scientists and engineers work for free.”

    Stealing that money also demands that capitalists “work” for free by getting an unchosen lower rate of return on their investment in Intel. That investment consists of equity and debt capital that Intel uses as financing to build its fabrication plants, research centers, and other operations. This $1.44 billion comes out of the return that Intel would pay those investors.

    Needless to say, those investors will also be less willing to invest in Intel in the future. Arbitrary fines like this mean that Intel and other successful companies will have a reduced supply of capital to fund their activities.