In my recent article on monopolization cases under Article 82 of the European Union treaty, I criticized Neelie Kroes and the European Commission for the aggressive application of competition law in cases where the outcome was at best uncertain. The dangers of the Commission’s approach are highlighted by the recent EC Commission decision to impose a $1.44 billion fine on Intel for a rebate programme that it used to persuade original equipment manufacturers to use Intel chips in their products during the period from 2002 to 2007.
Cases of this complexity raise serious factual and legal issues. On the former, no academic has anything useful to contribute, except to note that Intel CEO Paul Otellini vigorous chastised the Commission for disregarding all evidence that tended to dispute its judgment that Intel had in fact engaged in these practices. But this academic at least can raise two doubts about the Commission’s attack on rebates.
First, no claim of consumer harm can look just at individual cases. It must look at overall market conditions. Here the Intel rebates lowered prices for the 80 per cent of consumers that used its products. What consumer harm could outweigh those particular gains in either the short or the long run? Without these rebates Intel’s share of the market would fall and that of Advanced Micro Devices (AMD), the complainant in this case, would rise from its 12 per cent share. Suppose AMD’s share doubled, Intel would still serve about 2/3rds of the market. Where is the net harm when more consumers are helped than hurt by the rebate?
Second, AMD, as a nondominant firm, could of course offer rebates (or larger rebates) for its products to increase its market share. Now price competition increases, which is all to the good. The EC’s Kroes has gathered the scalp of yet another large American company by intoning the phrase “abuse of a dominant position”. But in so doing she has converted Article 82 into an anticompetitive provision, just as her critics have long feared.
Richard A. Epstein is the James Parker Hall Distinguished Service Professor of Law at the University of Chicago. He is the author of Free Markets Under Siege and a contributor to The Legal Foundations of Free Markets.