Earlier this week, European regulators said that they are investigating the online advertising deal between Google and Yahoo, even though that deal affects only the U.S. and Canadian markets. Such a revelation is a disturbing sign of the globalization of government meddling and the out-of-control use of antitrust as a weapon.
This news follows on the heels of rumblings from the U.S. Department of Justice, which recently hired Sandy Litvack, former DOJ antitrust chief under President Jimmy Carter, for possible antitrust charges against Google. This caused Google stocks to drop more than five percent in an already shaky marketplace.
If this story gives readers that déjà vu feeling, that’s because the underlying theme has unfortunately become common for any successful technology company. Microsoft, Apple, Intel, Qualcomm, and others face or have faced competitor-driven government investigations meant to slow them down.
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The United States Federal Trade Commission recently began a formal antitrust investigation into Intel’s business practices. This action is not simply a problem for Intel, but should serve as a wake-up call for the entire technology industry and anyone who values innovation.
Some of the drivers behind the Intel inquiry are complaints by its competitor, Advanced Micro Devices. Both AMD and Intel compete to provide microprocessors for computers, with Intel holding a larger portion of the market. For more than 15 years, AMD has complained about Intel, arguing that the company cuts prices and offers discounts in attempts to monopolize the market. The United States government has rejected such claims in the past, but now that there is a new FTC chief, the investigation is moving forward.
The idea that lowering prices for consumers is anticompetitive is so off-base that it would be laughable if it weren’t being wielded by politically motivated individuals such as New York Attorney General Andrew Cuomo. He launched formal proceedings in January, accusing Intel of “potential anticompetitive conduct.” Cuomo’s investigation just happens to coincide with AMD’s plans to locate a new US$3.2-billion factory outside of Albany, capital of New York state. The attorney general of California — where both Intel and AMD are located — rejected an invitation to join the action.
If there were no competition in the market, an antitrust inquiry might be less objectionable. However, greater access to computing power is getting continually cheaper precisely because competition remains strong.
“There is absolutely competition in the marketplace,” says Dean McCarron of Mercury Research, a research firm focusing on PC-related semiconductor and components markets.
Because of Moore’s Law, McCarron says that products in this space change every year and a half or so. “That’s the treadmill everyone is on. If [the companies] don’t constantly improve their manufacturing processes, they will be at a competitive disadvantage.” Intel might be a big firm, but if it makes any mistakes, competitors can gobble up its market share.
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