Why Intel was fined in Europe -- but not the U.S.
How come enticements Intel has used to get PC makers to install its chips over AMD's earned it a record fine from European antitrust regulators, yet are viewed as hunky dory by U.S. authorities? It comes down to differing philosophies about how a free market should function, says Luke Froeb, a former Federal Trade Commission official, and author of this economics text book. Europe maintains a strong belief in "ordoliberalism" -- which holds that many suppliers of a given product lead to healthy competition and a robust economy. But the USA believes corporations should be largely left alone to achieve economies of scale, and thus drive down prices, which ultimately benefits consumers. "Ordoliberalism is about the form of competition, whereas the U.S. approach is more about the effects of competition, " says Froeb, a professor at Vanderbilt's Owen Graduate School of Management. "The EU wants more competitors; whereas the US wants lower prices." By offering discounts to PC makers for shunning AMD chips, Intel drives down prices -- and hinders competition -- at least in the short run. "If AMD is forced out of business, then Intel may stop giving discounts, leading to consumer harm in the long run," says Froeb. "The EU is content to stop its analysis at the short run -- competitors are harmed -- whereas the US would want to see a good likelihood of long run harm to consumers to bring a case."