The CFI Microsoft Decision – Affirming European Antitrust Activism

I want Microsoft’s market share to diminish to significantly less than 95%. I can’t say that it has to be precisely 50% or whatever number, but it has to be significantly less than 95. 

- Neelie Kroes, European Commissioner for Competition Policy 

Today’s decision from the European Court of First Instance affirms the broad role that competition policy has in Europe. You can slug through the lengthy court opinion, but these press conference Q&A comments of Neelie Kroes (including the above quote) are revealing. They show the true intent of the European Commission’s competition policy regulators: competition policy is about micromanaging software development and dictating market evolution.

Here’s the largest buzzword from both Kroes and the EC’s press statement: interoperability. Again, a quote from Kroes, this time from her prepared statement: 

In confirming the interoperability part of the Commission’s decision, the Court has confirmed the importance of interoperability for consumer choice and innovation in high tech industries. If competitors are unable to make their products "talk to" or work properly with a dominant company’s products, they are prevented from bringing new innovative products onto the market, and customers are locked into the products of the existing provider.

Sure, interoperability is often an important feature of IT – if it’s market-driven. Otherwise, it smacks of the sort of “infrastructure socialism” that Adam Thierer and Wayne Crews have cataloged in their book. It also smacks of political rent seeking by competitors. As Crews recently articulated in a CEI C:\Spin, “subjecting Europe’s technology sector to political predation via aggressive antitrust regulation and involuntary licensing is less about protecting consumers than about competitors’ regarding themselves as entitled to someone else’s customers.” 

In addition, Paragraph 454 of the CFI decision has this precautionary nugget: "The Commission asserts that the applicant’s refusal creates a risk that all effective competition on the secondary market for work group server operating systems will be eliminated." A “risk”? Come on! EC antitrust regulators are now a pre-crime unit, using the force of law to intervene in precautionary ways. 

So are we at the dawn of a new antitrust era in the EU, where a precautionary principle applies to antitrust, and the refusal to supply or license intellectual property to a competitor violates competition policy? Maybe…but maybe not. 

The court affirmed that competition policy regulators have the legal power to engage in strong antitrust regulation. But whether as a matter of sound public policy the Commission should involve itself in certain competition policy matters is a different story. 

Regulators tout the way trust-busting promotes competition, but they rarely talk about the costs of antitrust interventions on the overall climate for innovation. Even Commissioner Kroes said in her remarks that “investment and innovation require a stable, fair and restrained regulatory environment. I remain committed to delivering just that.” 

Let’s hold Kroes to her word, and hope that a victorious European Commission isn’t a recklessly emboldened regulator. Competition policy is a blunt instrument to remedy perceived anti-competitive acts – nothing more. It shouldn’t be an expanded tool to enforce market shares, dictate prices, and resolve competitor disputes that are best left to the marketplace.

[Update: Check out this hilarious post at the Secret Diaries of Steve Jobs (here's a snippet):

We've proposed a great way for Europe to accomplish this and I'm happy to say that so far they seem to be listening to us. Which is more than I can say for the U.S. government which is still stuck with this quaint idea that governments shouldn't decide how much market share any one company should have in any one market.]

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