Europe Hits Intel with Billion Dollar Fine, but No Criminal Action

The European Commission has hit chip maker Intel with a €1 billion (US$1.45 billion) fine for anti-competitive activity, the largest fine ever imposed in the EU. It easily surpassed the €896 million penalty last year against glass maker Saint-Gobain for price fixing, and a €497 million fine in 2004 on Microsoft for abuse of dominance. Intel must pay up in 90 days for paying kickbacks, for paying a retailer to stock only Intel-based products and paying computer-makers to cancel or delay products using rival AMD chips. Unfortunately, this changes nothing. Until and unless the Commission follows this with criminal prosecutions, Intel will merely treat this as a cost of doing business.

Intel President and CEO Paul Otellini said the company plans to appeal at Europe's Court of First Instance. He said in a statement, “Intel takes exception to this decision. We believe the decision is wrong and ignores the reality of a highly competitive microprocessor market.” Maybe so, but even if this is untrue, he is doing his job of protecting shareholders' interests.

That said, the Europeans aren't alone in fining Intel, whose chips power about 80% of all computers in the world. Both the the Japan Fair Trade Commission and the Korean Fair Trade Commission have ruled against Intel of late. The US Trade Commission and the State of New York are engaged in investigations along the same lines. "It means nothing strategically. It is only a financial fine, not changing the way Intel is operating today," Jyske Bank analyst Robert Jakobsen told Reuters.

Intel won't change its way of operating until the current management it punished directly. Someone at Intel authorized illegal payments, and as such, someone at Intel engaged in bribery. This is a misuse of corporate funds, a theft from the stockholders. Surely, some criminal activity occurred, and surely, someone must pay for it.

Intel makes quality products; otherwise, it wouldn't have the market share that it does. Despite initial problems with the Pentium, Intel provides state-of-the-art goods. It is unnecessary for it to pay off customers to preserve what is, frankly, a ridiculous market share. A billion euro fine doesn't do anything to deter immoral management, whoever it is. Jail time is the only sure cure. The question now is whether the European Commission is prepared to really do its job or whether it is content to collect a fine and drop the case. History suggests a gutless non-move from here.

© Copyright 2009 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Fedora Linux.

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