The European Commission's record-setting fine on chip-maker Intel Corporation pushes Europe further along the path of substituting regulation for competition. The EC's use of huge fines against market-leading firms - fines calculated from a firm's world-wide sales, not from harm to European consumers - discourages aggressive competition that benefits consumers. Consumer harm should be the concern for competition law, and here instead consumers saw sharp declines in cost and increases in product quality - even Intel's complaining rival, AMD, enjoyed historic success during the period it claims Intel's actions foreclosed competition.
Extreme penalties can unfairly pressure companies to capitulate, and prosecutors often use the threat of a big punishment to avoid real testing of the underlying case. New York's Eliot Spitzer, for example, raised his own political profile while bankrupting firms later found innocent. Similar risks to the rule of law follow from the EC's Competition Directorate acting as prosecutor, investigator, and judge, with no real separation of functions and no impartial decision-maker until a Commission decision is appealed to court.
This case, like several other EC decisions in recent years, shows why American firms go "forum shopping" in Europe, taking complaints about American competitors where they're most likely to get a favorable decision. With America's new antitrust regime shifting to a more European approach to dominance cases, Europe may lose its position as a preferred forum for complaints. But unlike market competition, competition to see which regulators can be toughest on dominant firms doesn't lower prices or improve products for consumers.
Honorable Ronald A. Cass is Chairman of the Center for the Rule of Law, Dean Emeritus of