June 8, 2004 2:00 PM PDT

Intel probe highlights EU-U.S. regulation tussle

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The European Union's revival this week of a moribund antitrust investigation of chipmaker Intel reaffirmed the region's growing reputation as an aggressive regulator willing to cross swords with the United States.

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What's new:
The EU's revival of a long-dormant antitrust probe of Intel underscores Europe's growing prominence in competition regulation, where it has increasingly found itself at odds with the United States on a handful of important emerging policy issues.

Bottom line:
Some claim that Europe has always leaned more toward government intervention in markets than the United States has, while others say the traditional philosophical differences between the two sides have been overstated because of the swing away from corporate regulation during the Bush years. Whatever the case, it's clear that the United States can no longer ignore Europe's point of view when it comes to overseeing U.S. companies.

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The EU could yet exonerate Intel in the investigation, which was launched two years ago at the behest of Intel rival Advanced Micro Devices. Still, legal experts said the renewed action in the case underscores Europe's growing prominence in competition regulation, where it has increasingly found itself at odds with the United States on a handful of important emerging policy issues.

"Europe has become a player in the debate on what the appropriate competition policies should be," said M.J. Moltenbrey, an attorney in the Washington, D.C., office of United Kingdom-based law firm Freshfields Bruckhaus Deringer. "People used to look to the U.S. as the cutting edge in antitrust law, keeping up with the latest economic theories. Now the EU is at least an equal pulpit."

Europe's changing role in competition regulation was first recognized about three years ago, when the EU's Competition Bureau disapproved General Electric's proposed merger with Honeywell--a move that came after U.S. regulators had already signed off on the deal. Earlier this year, the bureau slapped Microsoft with a record $600 million fine--a decision U.S. officials said clashed with its own consent decree with the software giant, reached last year.

The severity of that penalty reflects a precept of European antitrust law that focuses more heavily on monopolists' effects on competing businesses rather than on consumers. As a result, European authorities in the Microsoft case placed more emphasis than U.S. regulators did on the way the company's behavior affected rivals such as Sun Microsystems and RealNetworks.

That same philosophy has also led EU regulators in general to place more emphasis than U.S. investigators might on complaints brought forward by, in the Intel case, competitors such as AMD.

The Intel investigation, which essentially focuses on whether the chipmaker has used its dominant position to influence the market for PC processors, was opened in 2001. The probe had been quiet lately but was never concluded. AMD has kept in touch with the commission and has continued to pass along information.

Legal experts said there are some important differences between U.S. and EU competition law that could shape the Intel investigation.

In the past few years, EU antitrust enforcement has stood out primarily in the area of regulating "dominant" companies that hold a monopolylike sway over a given market, according to Spencer Waller, director of the consumer antitrust program at Loyola University Chicago School of Law.

"Microsoft is the best example of that--and perhaps Intel, depending on what they finally decide," he said. "The difference is that the EU has been more aggressive in placing restrictions on companies that dominate vertical markets. U.S. regulators under the current administration have been reluctant to do that."

But he said the differences are easy to overstate. The EU is aligned with the United States on most major issues of competition policy, particularly in well-established areas, such as price-fixing cases and anticartel actions. Indeed, the EU's current competition commissioner, Mario Monti, has modeled many of his enforcement mechanisms on those pioneered first by the U.S. Department of Justice, for example, offering cartel members immunity in exchange for their cooperation.

Europe's rise in global antitrust enforcement comes as United States-led regulation efforts under the Bush administration have slackened, compared with those of the Clinton regime--a shift that has made the contrast between the two regions appear more stark than it has been in the past. But those differences could just as easily change with a new U.S. administration or the appointment of a new competition commissioner in Europe.

"The debate is happening on the fringes," said Freshfields' Moltenbrey. "On major policy points, both essentially agree. But they disagree on the best way to get there." (Intel is a Freshfields client, though Moltenbrey said she does not represent the company personally.)

More alike than different?
Monti himself, who has become a lightning rod for criticism of his commission's decisions, has taken pains to emphasize that recent trends have led to greater overlap between U.S. and EU competition law, rather than less.

"Put simply, the EU and U.S. agree on what competition policy should be all about," he said in February, according to a copy of a speech posted on the commission's Web site. "We both agree that the ultimate purpose of our respective intervention in the marketplace should be to ensure that consumer welfare is not harmed."

Such assurances aside, many officials in Washington have expressed concerns about the European Union's increasing interest in targeting American companies. Immediately after Monti ruled in March that Microsoft violated antitrust laws, U.S. politicians slammed the ruling as anticonsumer and overly regulatory.

The strongest denunciation came in a floor speech by Senate Majority Leader Bill Frist, R-Tenn., who said: "I now fear that the United States and EU are heading toward a new trade war--and that the commission's ruling against Microsoft is the first shot."

Ten members of the House Committee on International Relations--five Democrats and five Republicans--wrote a letter to Monti, protesting the sanctions on Microsoft. They claimed that the decision violated the spirit of a 1991 "comity agreement" the Clinton administration renewed in 1998, which generally says the United States should take the lead in overseeing U.S. companies.

Another point of contention is that U.S. officials sometimes view Europeans as unabashed fans of big government. In November 2001, William Kolasky, deputy assistant attorney general at the time, complained in a speech that the "European Union comes from a more statist tradition that places greater confidence in the utility of governmental intervention in markets."

On Monday, R. Hewitt Pate, the current Justice Department antitrust chief, spoke at a conference in Brussels, Belgium, where he elaborated on the differences between U.S. and European antitrust philosophies. Europeans are more ready to declare that a company has a "dominant position," Pate said, while Americans have "a more Darwinian view of the competition process."

Pate said, however, that with some exceptions, the two governments generally enjoy a "positive, strong and mature transatlantic antitrust enforcement relationship."

Robert Lande, who teaches antitrust law at the University of Baltimore, says the European point of view is closer to the Clinton administration's than the Bush administration's.

"If you were to say, 'How do you compare (former U.S. Assistant Attorney General) Joel Klein to Mario Monti, there's not much of a difference," Lande said. "But if you're going to compare (former Assistant Attorney General) Charles James and (Federal Trade Commission Chairman) Tim Muris, those folks are much more conservative; much less inclined to file lawsuits."

Lande said that when he worked at the FTC in the late 1970s, there was little understanding of or cooperation with European governments. Now, however, "realistically we're in a bipolar antitrust world. They are now our co-equal. They may have a different philosophy than we do, but we can't ignore them. They're no longer our little brother. They're our equal."

Jonathan Zuck, president of the Association for Competitive Technology, said his members--the group represents small to medium-size technology companies--should be worried about Europe's increased interest in regulating U.S. firms.

"This is a trend that I've been concerned about for the last six years," Zuck said. "Firms are going to be spending more and more money on lawyers and less and less on programmers. You're going to see either a lot of litigation or a decrease in innovation."

 

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