Double-punch for Wintel Duopoly - and Beyond


As expected, the European Commission has imposed what can only be called a swingeing fine on Intel:

The European Commission has imposed a fine of €1 060 000 000 on Intel Corporation for violating EC Treaty antitrust rules on the abuse of a dominant market position (Article 82) by engaging in illegal anticompetitive practices to exclude competitors from the market for computer chips called x86 central processing units (CPUs). The Commission has also ordered Intel to cease the illegal practices immediately to the extent that they are still ongoing. Throughout the period October 2002-December 2007, Intel had a dominant position in the worldwide x86 CPU market (at least 70% market share). The Commission found that Intel engaged in two specific forms of illegal practice.

First, Intel gave wholly or partially hidden rebates to computer manufacturers on condition that they bought all, or almost all, their x86 CPUs from Intel. Intel also made direct payments to a major retailer on condition it stock only computers with Intel x86 CPUs. Such rebates and payments effectively prevented customers - and ultimately consumers - from choosing alternative products.

Second, Intel made direct payments to computer manufacturers to halt or delay the launch of specific products containing competitors’ x86 CPUs and to limit the sales channels available to these products. The Commission found that these practices constituted abuses of Intel’s dominant position on the x86 CPU market that harmed consumers throughout the EEA. By undermining its competitors’ ability to compete on the merits of their products, Intel’s actions undermined competition and innovation. The Commission will actively monitor Intel’s compliance with this decision. The world market for x86 CPUs is currently worth approximately €22 billion (US$ 30 billion) per year, with Europe accounting for approximately 30% of that.

With this move the European Commission is clearly keen to signal that no company is too big, and no fine to massive, when it comes to its antitrust investigations. It also underlines that fact that Europe, not the US, is making all the running here (although that might change given the new US administration's hints that it wants to join in the fun.) But I think the implications go much further.

First, this fine is being levied on Intel, but also, effectively, on the Wintel duopoly, which was already hit when Microsoft was fined by the European Commission for its own monopolistic abuse. I think it represents the definitive slapdown for the Wintel axis, and marks the end of an era when two companies effectively controlled the desktop and, to a lesser extent, server sectors. Although not directly aimed at Microsoft, this latest announcement will, nonetheless, represent a warning to it for the future that the European Commission is quite happy to demand ever-greater fines until companies start to toe the line.

This might have interesting implications for the netbook market, where Microsoft is desperately trying to keep manufacturers from offering cheaper GNU/Linux models. How it does that could well come under scrutiny by the European Commission if there's any hint it is apply pressure unfairly.

But beyond that, there's a more subtle point. These fines arise, after all, from the abuse of monopoly power. And there are no greater abuses than those associated with intellectual monopolies – patents and copyrights. The more that the European Commission punishes such monopolies, the sooner, it seems to me, it will be forced to confront the worst monopolies – those actually backed by its constituent governments. If it wants to make the European markets truly fair, and to promote competition, it should not just be hitting big, bad companies that bully competitors, but the big, bad system that has such bullying at its heart.

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