New York Times Editorial

Editorial
Intel and Competition


Published: May 21, 2009

As American regulators slept through the past eight years, several authorities overseas decided that the Intel Corporation has been abusing its near monopoly position in the microchip market to squeeze out its smaller rival Advanced Micro Devices, constraining consumers’ choice.

It is now the United States’ turn. The Federal Trade Commission, which opened a formal investigation into Intel’s business a year ago, should decide without delay whether to pursue the company in court. The issue is not just whether Intel’s tactics against A.M.D. amount to illicit behavior. The larger question is whether Washington is willing to pursue monopolies vigorously for predatory practices and foster an environment where competition and innovation can thrive.

Since 2005, regulators in Japan and South Korea have ruled against Intel. This month the European Commission slapped the company with a $1.44 billion fine. It found that Intel has been giving hidden rebates to computer makers that bought all or virtually all of their chips from Intel and paying some to delay or hinder the introduction of products that had A.M.D. microprocessors.

Intel denies those accusations, arguing that the volume rebates it offers never carried the alleged quid pro quos. The company appealed the Korean fine and said it would appeal the European decision.

For much of the Bush administration, regulators declined to look formally into the charges against Intel. That reluctance was the product of an extremely narrow reading of antitrust law, validated by a conservative Supreme Court that has become increasingly hostile to antitrust enforcement.

In the Bush administration’s view, to get in trouble a monopolist must do worse than use unfair methods to undermine a competitor. Regulators must usually prove that consumers were directly hurt, typically through high prices. When the wrongdoing is to offer a client conditional rebates — meaning lower prices — that can be especially hard to prove.

That view of consumer harm is too restrictive. It often seems to ignore the fact that a dominant firm that uses unfair tactics to marginalize its rivals deprives consumers of choice, another form of harm. Without competitors there is no competition. Without competition there is no incentive for innovation, or to reduce prices.

The Obama administration has a different view. The Justice Department’s antitrust division has rescinded Bush administration guidelines intended to shield monopolies from antitrust accusations. The F.T.C. is also likely to be more active under its new chairman, Jon Leibowitz. He is already considering pursuing future antitrust cases with a little-used provision of antitrust law that directly outlaws unfair methods of competition. The American economy cannot thrive without antitrust laws. It is time to start enforcing them.