Solid State Technology | 07 Aug 2009
At a time when many companies are struggling to stay profitable, Intel, the world’s largest computer processor manufacturer, recorded a net profit of $1 billion in its second quarter. Despite this impressive feat, however, the corporation reported a quarterly loss of $398 million, the first loss it has experienced in 21 years. What accounts for the $1.4 billion difference? In May, the European Union fined Intel $1.45 billion for violating antitrust laws. The EU accused Intel of “predatory pricing,” an ominous euphemism for offering products more cheaply than its competitors. Intel plans to appeal the fine and rightfully so. Intel did not send thugs to threaten customers against purchasing computer chips from its rivals. All it did was make an offer to retailers and manufacturers that they were free to refuse. The reason most of them accepted the offer is because Intel products are so popular among so many customers. Indeed, as Jonathan Zuck, president of the Association for Competitive Technology, noted, “For the past 20 years, the microprocessor industry has delivered more innovation, more speed, more functionality, and lower prices. Over the past 10 years, the average price of Intel’s PC microprocessors has dropped by 60 percent.” Who will benefit from Intel’s punishment? Consumers were already overwhelmingly benefiting from Intel’s superb quality of products and low prices. By issuing this fine, the EU has only made it more difficult for Intel to do what made the company so successful in the first place: continuous improvement and innovation, accompanied by a decrease in prices.
Tags: ACT Quote, Antitrust Policy, Competition, North America
