Wednesday, May 13, 2009

Intel is fined for playing Monopoly

The European Union fined Intel Corp. a record euro1.06 billion ($1.45 billion) on Wednesday, saying the world's biggest computer chip maker used illegal sales tactics to shut out smaller rival AMD. Full story here.
I don't pretend to be much of an expert in these matters, but I'm deeply skeptical of the EU's decision to fine Intel this outrageous amount for running a 'monopoly.'

It's rather like the similar decision to nobble Microsoft a few years ago - the US Department of Justice accused MS of running a 'monopoly' because they bundled their Internet Explorer browser with their Windows operating system - thereby making it more difficult for competitors to get customers to use their competing product.

My problem stems from a simple premise - that these 'monopolies' didn't occur in a vacuum. The free market gave canny businessmen like Bill Gates a window to succeed - and that's exactly what he (and others) did. Now, because they dared to become 'too successful', the government punishes them for their achievements!

'Success' is the issue at the heart of this monopoly melodrama - Microsoft and Intel were both early innovators in a new and unexploited industry. Churning ahead of the pack allowed them to build a powerful position, which they then exploited to muscle out the competitors scrabbling to play 'catch up.'

Was that wrong? Not really, as Microsoft and Intel are both private industries, in the business of making money.

I find it wrong that the government feels like it can hogtie a business simply because it's done so well. One of the fundamental philosophies of the free market system is the concept of a level playing field - the rivals of Intel and Microsoft started at the same position the more successful companies did - the fact that they didn't achieve as much can't be laid at anybody else's door.

It's like an Olympic athlete complaining that the only reason he didn't win the race is because the other runners were 'cheating' by being faster than he was.

Besides, the government is the last body that should be interfering in the business of 'policing' monopolies. After all, many of the European Union's governments advocate public ownership, which is, essentially, nothing but a government sponsored monopoly.

And even America, the cradle of the Capitalist system, falls flat when it comes to government intervention in so-called 'monopolies.' Microsoft is just the latest example of a business falling victim to its own perceived 'over success.'

My favorite example of government meddling is Pan Am airlines: Back in the 40's, their CEO, Juan Trippe, manipulated the government into advocating a single-airline bill that would have granted Pan Am a monopoly over transatlantic flights (and dissected Pan Am's rival, the supposed 'monopoly' that was Howard Hugh's 'Trans World' airline.)

It was unfair, it was unethical and it was all championed by corrupt elements within the government. Who's to say that Microsoft and Intel's vilification didn't stem from similar shady elements within the government?

It seems to me that the official attitude towards 'monopolies' has always been entirely inconsistent. As far as the government's concerned, the only way to ensure 'fairness' is to handicap any business that gets too big for its britches.

But while I complain about the principle of the whole thing, I'll confess that this tactic has paid off for many of us. Without the government's involvement, Apple Mac wouldn't have blossomed into it's sleek, geeky gorgeousness - and I'm typing this post using Mozilla Firefox as my Internet Browser - the sworn enemy of Microsoft's 'Internet Explorer.'

For the consumer, choice is always a good thing - but I'm still wary of governments who feel entitled to punish success and give unfair advantages to businesses that arguably don't deserve them.

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