Thursday, May 14, 2009

Intel Antitrust Ruling, Is Google Next?

Intel Logo 

The European Union announced an antitrust ruling against Intel today.  The fine totals almost $1.5 billion.  As a free market kind of guy, this ruling obviously bothers me.  I find it hard to understand how consumers were actually hurt by Intel being aggressive with their partners and giving large rebates to those who bought more Intel chips.   Maybe it is because I do not feel that chip prices are needlessly high.  The price of microprocessors has gone down significantly over time while their performance continues to go up.  I also have also studied monopolies a lot in my life (My junior independent work was on the Microsoft Monopoly) and it is unbelieveably hard to actually get and maintain a monopoly.  This is especially true in a goods market like Intel is in. 

With rulings against Microsoft and Intel, I can't help but wonder if Google is in the EU's radar.  One of the things that really stuck out to me in the EU's reasoning was Intel's practice of forcing its partners to use them on an exclusive basis.  Now I know for a fact that Google does the exact same thing by signing exclusivity contracts with many of its partners.  If you do business with Google, they want to be sure that you are a committed partner and force you to sign exclusivity agreements.  It is not even an implicit agreement.  They don't even make it extremely profitable for you to do it so that you wouldn't even choose to go to another provider.  They simply make you sign a contract that forbids you to do business with a competitor.

Now I don't actually have a problem with that.  If you do not want to do business with Google on their terms you are of course free not to do business with them.  But the behavior, if you use the EU's definition, is clearly anti-competitive and an abuse of monopoly power.  As Google gets bigger and more successful they will continue to get hit on all sides.  Everybody will want a part of them.  How do you think Google will fare?

1 comment:

  1. This is yet another example of a slippery slope argument. If forcing your business partner to enter into an exclusive contract is anti-competitive then where is the line? If Intel offers the best prices and companies want to buy from Intel, will the EU force a price that Intel cannot go below? I can understand if there was something illegal like price fixing or sabotage (i.e. Intel hiring arsonists to burn down its competitors' factories to prevent manufacturing), but companies in various industries enter into exclusive contracts all the time. My company does the same thing with big clients. If you come to play then you have to go by the game rules.