European Commission

Body responsible for proposing EU legislation, implementing it, and monitoring compliance.

The European Commission’s role in competition policy has become increasingly important to business in recent years. Since 1990 when the office was formally assigned a role in competition policy, the EU’s competition commissioner has been steadily gaining influence as the chief regulator of competition policy in the member-nations of the EU. As with antitrust authorities in the United States, which include the Federal Trade Commission and the Department of Justice, the role of the competition commissioner is to ensure that no one enterprise uses its market power to drive out competitors and monopolize markets. In 2009, for example, the Commission fined Intel a record €1.06 billion for abusing its market power in the computer chip market. (See the next Management Focus for details.) The previous record for a similar abuse was €497 billion imposed on Microsoft in 2004 for blocking competition in markets for server computers and media software. The commissioner also reviews proposed mergers and acquisitions to make sure they do not create a dominant enterprise with substantial market power.9 For example, in 2000 a proposed merger between Time Warner of the United States and EMI of the United Kingdom, both music recording companies, was withdrawn after the commission expressed concerns that the merger would reduce the number of major record companies from five to four and create a dominant player in the $40 billion global music industry. Similarly, the commission blocked a proposed merger between two U.S. telecommunication companies, WorldCom and Sprint, because their combined holdings of Internet infrastructure in Europe would give the merged companies so much market power that the commission argued the combined company would dominate that market.

MANAGEMENT FOCUS The European Commission and Intel

In May 2009, the European Commission announced that it had imposed a record €1.6 billion ($1.45 billion) fine on Intel for anti-competitive behavior. This fine was the result of an investigation into Intel’s competitive conduct during the period from October 2002 to December 2007. During this time period, Intel’s market share of microprocessor sales to personal computer manufacturers consistently exceeded 70 percent. According to the Commission, Intel illegally used its market power to ensure that its major rival, AMD, was at a competitive disadvantage, thereby harming “millions of European consumers.”

The Commission charged that Intel granted major rebates to PC manufacturers—including Acer, Dell, Hewlett-Packard, Lenovo, and NEC—on the condition that they purchased all or almost all of their supplies from Intel. Intel also made payments to some manufacturers in exchange for them postponing, canceling, or putting restrictions on the introduction or distribution of AMD-based products. Intel also apparently made payments to Media Saturn Holdings, the owner of MediaMarkt chain of superstores, for only selling Intel-based computers in Germany, Belgium, and other countries.

Under the order, Intel had to change its practices immediately, pending any appeal. The company was also required to write a bank guarantee for the fine, although that guarantee is held in a bank until the appeal process is exhausted.

For its part, Intel immediately appealed the ruling. The company insisted that it had never coerced computer makers and retailers with inducements and maintained that Intel had never paid to stop AMD products from reaching the market in Europe. Although Intel acknowledges that it did offer rebates, it claimed that they were never conditional on specific actions by manufacturers and retailers aimed to limit AMD. As of early 2012, the appeal was still working its way through the judicial process.

Sources: M. Hachman, “EU Hits Intel with $1.45 Billion Fine for Antitrust Violations,” PCMAG.com, May 13, 2009; and J. Kanter, “Europe Fines Intel $1.45 billion in Antitrust Case,” New York Times, May 14, 2009.

The European Council represents the interests of member-states. It is clearly the ultimate controlling authority within the EU because draft legislation from the commission can become EU law only if the council agrees. The council is composed of one representative from the government of each member-state. The membership, however, varies depending on the topic being discussed. When agricultural issues are being discussed, the agriculture ministers from each state attend council meetings; when transportation is being discussed, transportation ministers attend, and so on. Before 1993, all council issues had to be decided by unanimous agreement among member-states. This often led to marathon council sessions and a failure to make progress or reach agreement on commission proposals. In an attempt to clear the resulting logjams, the Single European Act formalized the use of majority voting rules on issues “which have as their object the establishment and functioning of a single market.” Most other issues, however, such as tax regulations and immigration policy, still require unanimity among council members if they are to become law. The votes that a country gets in the council are related to the size of the country. For example, Britain, a large country, has 29 votes, whereas Denmark, a much smaller state, has 7 votes.