Wednesday, May 13, 2009

The Europeans Punish Success, Again

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.

4 comments:

Doug A. said...

Thanks for reporting this, GB. The news has been so depressing as of late.

Galileo Blogs said...

We are going to have dismal topics to write about for quite some time. But, in writing about them, we name them for what they are, and that is fighting back.

In that vein, I saw that even Treasury Secretary Geithner gave passing acknowledgment to the Fed's role in causing this economic crisis by setting artificially low interest rates for years. Those low rates stoked the housing bubble.

We cannot expect someone like him to turn around, but the fact that he acknowledged this is a testament to everyone who has publicly identified the Fed's role in causing this crisis.

Fighting back is a way to partially cure the depression.

Anonymous said...

If I were Intel, I would close up operations in Europe, stop selling my CPUs and other tech products there, and let the EU just rot. That'll teach 'em. If every company did the John Galt response, these regulators would soon find themselves with nothing left to regulate.

Galileo Blogs said...

For that to be effective, Intel would have to fully understand that it has an unconditional right to its property. That would include a complete understanding of how antitrust violates its rights.

With that knowledge it could withdraw from Europe as a protest, if it publicly and proudly named the reason why it did that.

But I still doubt that it would work to their self-interest. I could imagine the Europeans actually confiscating Intel's patents on the grounds that Intel's customers have the "right" to Intel's products. There would only be too many other firms (perhaps AMD) who would then gladly make those chips using the stolen patents.

Yet, it would be exciting to see Intel try it. But first they need the knowledge, which they don't have, as far as I know. Needless to say, they can start by reading Ayn Rand's books, including articles she wrote or sponsored on antitrust.