Antitrust & Competition Policy

I almost choked on my morning coffee when I saw the headline last week that Novell and Microsoft announced a deal to make their software work together. As someone who once employed VMware to use Word on a machine running Linux OS, I have to say that I was both surprised and thrilled. And, as someone who closely followed the Microsoft antitrust cases in both the US and Europe, I was astounded. I wish I could call Judge Jackson right now and ask him why he thinks these two competitors who once looked to be arch enemies are now joining forces (Novell accused MS of antitrust violations and sued over WordPerfect). But of course Jackson didn’t think Microsoft had any competitors, so perhaps he wouldn’t really understand the question.

The fact that Microsoft and Novell are now teaming up to provide consumers with something they have been clamoring for (interoperability) is proof that the marketplace can deliver benefits to consumers without government help even if the two competitors have a bad history.

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Antitrust enthusiasts thought they scored a coup in 2004 when they persuaded Congress to encourage the courts to conduct more assertive reviews of corporate mergers (with rights of participation for gadflys, busybodies and others) pursuant to the Tunney Act (see my previous post). Apparently, the move was too clever by half. The Antitrust Division sidestepped this feature of the Tunney Act completely by approving the AT&T-BellSouth merger with no conditions. The New York Times claims the Bush Administration has abdicated its responsibility to act as a “referee,” as if one is needed. The newspaper complains the administration hasn’t brought a single major monopoly case under the Sherman Act, as if that proves anything. Most amusing of all, it notes that career officials were “demoralized” when the administration cleared Whirlpool’s acquisition of Maytag, inferring this could happen again. The Times didn’t explain the relevence of that. Apparently, some believe, bureaucrats ought to be able to perform their jobs as they see fit, or at least their judgment is superior to elected politicians or officials who’ve been confirmed by the Senate.

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For years, Microsoft has come under heavy fire for not making its systems secure enough. Now, with the upcoming release of its new operating system (OS), Windows Vista, the company is being unfairly attacked by self-interested competitors for adding more security to protect consumers.

Back in 2002, when Microsoft co-founder Bill Gates announced that the company would be making security a priority, the computing industry responded with a collective, “Finally.” Thomas Greene, writing for the Register, reported at the time that “Bill finally admits that the company has wrongly emphasized whistles and bells over security, and decrees that this shall change.” He went on to say, “Hallelujah. He’s finally arrived on the same page as the rest of the computing world.”

Greene’s analysis would have been more accurate if he had written, “the rest of the computing world except for those who will lose business when consumers’ computing lives become more secure.” But Greene wrote long before McAfee decided to place a full-page advertisement in the Financial Times predicting doom and gloom if Microsoft is allowed to make its own product more secure.

[:]

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Bureaucrats aren’t clueless, so when one makes a comment the defies logic, like the following, it may mean something’s up:

It is misleading to imply that the commission could be the cause of delays,” said Jonathan Todd, the spokesman for the antitrust division of the commission. “It is not up to us to tell Microsoft what it has to do to Vista. The onus is on Microsoft to design its product in conformity with European competition laws.

The spokesman is referring to a comment from someone at Microsoft to the effect that uncertainty over how the EU will act is making it hard for the company to make some critical decisions on how to design its new operating system, Windows Vista. Microsoft asked for guidance from the EU and the EU has declined to respond, so it’s probably anything but misleading to say the commission could be the cause of delays.

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The European Commission has taken a break from trying to re-design Microsoft’s software just long enough to get excited about DVDs. According to this report, “European Commission antitrust officials are probing the licensing strategies of two rival new generation DVD developers, HD DVD and Blu-ray Disc.” Given that competition is fierce among rival DVD developers, one wonders how exactly Eurocrats think their help is needed in creating competition.

At least it’s not all bad news coming from Europe. A small ray of hope for America’s tech industry arrived this week when the French Constitutional Council declared major aspects of France’s iPod law unconstitutional. Apparently, not all property rights have disappeared from the continent.

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Last week, European Commission (EC) regulators fined Microsoft 280.5 million euros (US$356 million), adding to the 497 million euros ($630.7 million) the company has already been forced to pay.

Noncompliance with a mandate to disclose technology documents is the official reason for the fine, yet the deadline for such compliance has not yet passed. This bizarre situation should serve as a warning to anyone thinking of doing business in Europe, and it should make the Europeans seriously question the legitimacy of their so-called “competition” policy.

In March 2004, the EC ruled that in addition to paying the record 497 million euro fine, Microsoft had to sell a copy of Windows without Media Player software and hand over the specifics of its Windows server technology to rivals. Both these mandates were meant to correct Microsoft’s supposedly harmful market power.

Of course, that supposition is highly suspicious, and the directives are currently under appeal at the European Court of First Instance. Take, for example, the idea of offering consumers a product with less functionality.

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EU regulators today fined Microsoft 280.5 million Euros ($357 million USD) for supposedly not complying with their demands. Of course, the regulator’s demands are currently in the appeals process and the Commission dragged their heels in making their demands clear, but still, they argue that it’s Microsoft’s fault. That seems pretty unfair, and prompted MS’s General Counsel to say, rather diplomatically (imagine if Steve Jobs were in this position!), that “the real issue here is not about compliance, it’s about clarity.” Apparently, Microsoft has over 300 employees working around the clock to satisfy the EU bureaucrats who seem to know little about the tech industry (see my pervious posts on this, especially those about the product the Eurocrats designed that no one wanted to buy). What a mess.

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