Regulator’s Tone Raises Hackles at Intel

By Ashlee Vance
Jock Fistick/Bloomberg News Neelie Kroes, the European Commission’s competition commissioner on Wednesday.

If Intel and the European Commission have feelings for each other, they’re not of the warm and fuzzy variety.

On Wednesday, the barbs started to fly, as European regulators hit Intel with a $1.45 billion fine for abusing its dominant position in the chip market and blocking its key rival, Advanced Micro Devices. The fine stands out as the largest in the European Commission’s history.

Neelie Kroes, the commission’s competition commissioner, seemed on a mission with both the fine and her comments about Intel. In a video recording of her press conference, Ms. Kroes can be seen joking about Intel’s recent ad campaign, which portrays the company as the “sponsor of tomorrow” -– a nod to Intel’s history of innovation.

“Well, now they are the sponsors of European taxpayers, I would say,” Ms. Kroes said. Later, she added, “I can give my vision of tomorrow for Intel here and now: Abide the law.”

In an interview, Paul Otellini, Intel’s chief executive, hit back against such comments.

“I think it’s inappropriate to joke about these sorts of things,” Mr. Otellini said. “This is a matter that is incredibly serious. We take it seriously.”

As for the record-breaking fine, Intel remains perplexed. “We don’t know how they came up with that number,” Mr. Otellini said.

Mr. Otellini said that Ms. Kroes may have had a larger agenda with the fine than just punishing Intel. “I suspect part of this was personally or politically motivated,” he said.

Given A.M.D.’s financial and product struggles, how seriously has Intel has considered the prospect of being the only mainstream chip maker standing?

“We have not been perfect over the last 25 years, either,” Mr. Otellini told me. “On average, we have been more perfect than they are.”

Mr. Otellini pointed to Transmeta, A.M.D. and Via as competitors that have kept the company on its toes over the years through either better products or low prices.

“I don’t see this market as being static or stagnant in any fashion,” he said.

Comments are no longer being accepted.

Jeff Killeen May 13, 2009 · 3:56 pm

It is time for the US Government to step in and protect US companies. You don’t see the EU going after Airbus who not only has engaged in questionable pricing but is using state money, which it never has to repay, to fund its R&D thus enabling predatory pricing.

It is selective enforcement against US companies like Honeywell, Microsoft, and Intel that won the marketplace. If Honeywell, Microsoft, and Intel committed crimes they would be misdemeanors when compared to the felonies Airbus has committed.

Most Americans do not realize EU anti-trust laws do not protect the marketplace. Their laws are designed to protect EU companies. You can be fined in the EU even if you prove what you did benefited the market. In the US the standard is did you harm the market. In the US the first step in an anti-trust case is defining the market. In the EU the first step is some competitor claiming it has been hurt.

The EU’s approach to anti-trust is just more protectionism for the EU’s socialist companies…

cp May 13, 2009 · 4:20 pm

Umm Jeff….AMD is an American company.

Larry May 13, 2009 · 5:24 pm

I actually think Jeff has a point. Obviously AMD is an American company; but sometimes it does seem like the European take on these issues is chauvinistic. I haven’t decided one way or the other; but Ms. Kroes’ snarky comment doesn’t go very far to dissuade me.

Anno Hermanns May 13, 2009 · 7:38 pm

Oooooh. Snarky Comments.
From a regulator.
A creature Intel has come to think of as too weak to walk.
That has to hurt!

I’m just glad that there are still regulators somewhere (and I don’t particularly care where they are) that take their responsibility seriously. Ms. Kroes is doing a great job, and she is doing everyone a favor who wants Intel to thrive on the quality of their products and not on their racket techniques.

By the way, I thought it is interesting that a second company which Mr. Otellini credits with keeping Intel on its toes is another company that was at the receiving end of Intel illegal conduct: Transmeta. Pushed out of business by Intel before Intel settled a patent infringement lawsuit by paying 250 million to what had become a holding company.

So yes, there is a pattern, and no, apart from the 2×4, nothing much else seems t trigger any learning.

John Doze May 13, 2009 · 7:53 pm

Perhaps American companies are more used to being treated like royalty. It’s a pleasure frankly to see a regulator not just ask, but demand, that companies “abide the law.” That’s not snarky, that’s her job.

The Wise Bard (Madison, WI) May 13, 2009 · 9:03 pm

Jeff, just out of curiosity:
Is it by divine decree that the American approach to antitrust, such as it is, is necessarily superior to approaches adopted in other parts of the world?

One can certainly debate competing (so to speak) approaches on their merits (and folks may disagree on how to define “merits” in this context), but you seem terribly offended that anyone would consider anything other than the American approach.

Once upon a time, Louis Brandeis argued something pretty close to big is bad–he opposed huge aggregations of power, economic, political, or otherwise. We took a different path, resulting in dysfunctional mega-companies “too big to fail,” and are now suffering the consequences.

Jeffrey May 13, 2009 · 9:39 pm

I think there is a great opportunity for some reasoned democratic debate here. The EU seems to be promoting the philosophy that it is important to protect competitors independent of any impact on consumers and the marketplace. The US for the most part far taken the opposite approach. As an outside observer, the US approach feels more direct and measurable since if the real goal is to protect consumers it seems like you should base any claims on their consumer impact.

As in most democratic debate, what is not productive is throwing barbs or making this a “US versus EU” issue because it is not. We’re all in this global economy together. It can certainly feel satisfying to want to “stick it to the big guy” but that is almost certainly not a productive desire to act on. And nobody is seriously questioning whether companies should abide by the law, rather the questions being raised are about the philosophy behind the laws and how the laws are being executed.

MT May 13, 2009 · 9:48 pm

The European regulators are just as tough on European and Asian multinationals as they are on American firms.

What’s more, the European regulators are tough on the European member states of the EU as well, to ensure open market across national boundaries within the European Union.

Many American companies still haven’t figured out how to break free from the European regulator’s grip — for example, lobbyist money plays a much less influential (i.e. corrupting) role in Europe than it does in the United States.

Finally, it’s the United States antitrust regulators who dropped the ball, especially during the past eight years of the Bush administration. (It’s too early to see if the Obama administration will do any better.)

So any complaints from American CEOs — or by commenters in this forum — that American firms are being “picked on” is just factually untrue and amounts to little more than whining.

Jeff Killeen May 13, 2009 · 10:55 pm

The American company AMD should have pursued the issue in the American courts. Where American the market based approach would have been the benchmark

Jeff Killeen May 13, 2009 · 11:03 pm

Re: “The Wise Bard” – one can debate if the EU theory of anti-trust is better or worse than the US approach. However I don’t see the EU holding EU companies (e.g AIrbus) to the same strick standards it holds no-EU companies to. My offense is not that EU thinks differently but in fact they don’t apply their own standards equally.

The issue here is selective enforcement…

JimF May 13, 2009 · 11:22 pm

There is no such thing as an “American multinational”; once companies become huge, multinationals they abandon nationality and become amoral.

Intel is among the leaders in exporting American intellectual property to China in return for market access.

Evan R May 13, 2009 · 11:23 pm

My only thoughts on this issue revolve around the fact that the laws being used to punish Intel are the same ones being broken by AMD.

Why should AMD be allowed to use predatory pricing (selling below the cost of production), send manufacturers MILLIONS of free chips to persuade them to build systems they otherwise wouldn’t build because they don’t think the systems would otherwise be profitable, use the same sort of marketing strategies as Intel, etc, etc… why can AMD utilize the same types of anti competitive behavior Intel is doing if Intel can’t do it back? That sounds way more anti competitive to me then having the company with the most market share using these strategies. If the market leader can’t do it, NO ONE should be able to do it.

That to me is why I find the rulings against Microsoft and Intel ludicrous. Of course they are using their market leadership position to further their profitability but they are doing so using the same exact methods that everyone else in the market place is.

The poster above who mentioned that in the US the focus on the competitive nature of the market is the priority while in the EU it is not was spot on. That is the crux of the issue. Anti competitive laws are meant to protect us, the consumer, not protect companies who aren’t competitive by making the competitive ones less competitive with asinine restrictions and fines. This stuff HURTS the marketplace and through that.. US the consumers.

I have nothing against going after companies who are truly impacting the market in a negative fashion but only making the market leader obey the laws while everyone else gets to do as they please helps no one.

Keith Walker May 14, 2009 · 2:40 am

I would raise a snarky tone, for a hackle anyday!

john S. May 14, 2009 · 3:40 am

It should be noted that AMD’s major chip production factories were in Germany at the time of this infraction since they spun out their US facilities under the Spansion name. Spansion is now bankrupt and the former AMD facilities were also recently sold. So in my opinion this is the EU protecting German jobs not one American company from another.

Rich May 14, 2009 · 4:01 am

The question remains, is Intel’s behavior the normal behavior of the market? Perhaps the more profound question should be, at the level of the large corporation, just how much of classic market economics is operative? Paul Samuelson for years has proposed that it no longer describes the economic reality of the corporate world….which in the USA has been described more broadly as the corporate state.

Europe is informed by a social contract that looks more directly at corporate realities. The EU regulators may, or may not, be wrong, about a particular issue…even perhaps this with Intel …but they are correct in principal that corporate behavior is subsidiary to the public interest and public purpose. And further, that the corporate interest is not always in the interest of nations…their culture…their values…or their morals. The EU is right to make this assertion.

Vladimir Dzhuvinov May 14, 2009 · 4:15 am

This is the third poorly written article by NYTimes that I read on the Intel antitrust topic.

I don’t care about the posturing remarks of Kroes and Otellini. Instead I want to know:

1. What are the exact allegations?

2. Do we have reason to suspect the EU Commission of political bias in its anti-trust pursuits?

3. What is the present state of the microprocessor market and is there a real danger of Intel monopolising it?

Nikolay May 14, 2009 · 5:20 am

Well, those preferring to think that US companies are being singled out by the EU anti-trust body should perhaps consider that the previous record EU anti-trust fine was against a French company (Saint Gobain). So no country or industry has protection against the EU anti-trust authorities.

Don’t know what is the case of Airbus but there are other plane makers in the EU (I think in the Czech Republic) so if they felt their market threatened by Airbus they could have easily sought remedy from the EU Commission. My impression is also that Boing’s dealing with the US government are not beyond reproach.

Chinaski May 14, 2009 · 8:24 am

Americans fear “big government” and “government meddling” and as a result let de facto monopolies, huge companies and trusts suck the consumer.

A good example of these are the cell phone and internet operators. They decide what phones Americans can buy, remove useful features from them, the services are poor, the coverage is abysmal , the costs high etc. As a result, America is a laggard in mobile services and broadband internet. Why improve and compete if you don’t have to?

You need smart government regulation in order to boost competion and innovation. During the Bush years the fat American corporations were so pampered it could be called Republican socialism.

Franko May 14, 2009 · 2:33 pm

Scuttling, not competing with rivals — Secretive, corrupt, autocratic, US corporations have been running roughshod over over the poor and underdeveloped parts of the world

Perhaps, Microsoft and AT&T next ?

Mark F. May 22, 2009 · 4:44 pm

It’s laugable to hear bitching about the European regulators- they’re actually doing their jobs while the US regulators were working for the industries they supposedly regulated. Welcome to TARP, AIG, Madoff and 6.7 million receiving unemployment checks. Its like listening to 3-day dry alcoholics at an AAA meeting- suddenly they think they can preach.

Sorry folks, we don’t have a high-hourse to get on at this point- the horse was repo’d due to lack of regulation. What we need in the US is regulation more like the Europeans. In IT everyone knows MS (Netscape, many others) and Intel (AMD and everyone else) are bullys and bandits- If it wasn’t for the EU we wouldn’t even have Firefox.