Antitrust Eurocrats Hammer Microsoft

Published September 1, 2006

This summer, European Commission (EC) regulators fined Microsoft Corp. €280.5 million ($356 million), adding to the €497 million ($630.7 million) the company has already been forced to pay.

Noncompliance with a mandate to disclose technology documents is the official reason, yet the deadline for complying had not yet passed when the fine was levied. This bizarre situation should be 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.

Crippled Software

In March 2004, the EC ruled that in addition to paying the record €497 million 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 mandates were meant to correct Microsoft’s supposedly harmful market power.

That supposition is highly suspicious, and the directives are under appeal at the European Court of First Instance.

Take, for example, the idea of offering consumers a product with less functionality. As of late April 2006, Microsoft had sold 35 million units of regular Windows, but only 1,787 copies of the Eurocrat-designed Windows without Media Player. Of those 1,787 copies sent to retail shops, no one knows if any consumers purchased even a single copy.

EC bureaucrats created a wildly unpopular product and wasted a lot of time and money that could have been spent creating innovative products for consumers.

Trade Secrets on a Platter

Then there’s the issue of handing over Microsoft’s intellectual property, the reason for the fine this summer.

In 2000, Microsoft figured out how to create a distributed computing cluster that would work incredibly well with thousands of computers, a major breakthrough in computing technology. Other vendors have not been able to replicate this success through reverse engineering, so it’s not difficult to understand why they want to view and copy Microsoft’s patented invention. With their ruling, EC regulators offered up the secrets on a silver platter.

This part of the ruling was a major setback for Microsoft, but the company complied nevertheless, offering to license the source code. Because competitors didn’t want to pay for the code, Microsoft provided seven versions of technical documentation that independent experts from the European software industry said met or exceeded industry standards.

The EC still wasn’t happy. In October 2005, it appointed a trustee to oversee the process. The trustee and Microsoft agreed on a specific set of objectives and dates for completion.

So far, Microsoft has met six of the seven milestones, and the final completion date had not passed when the EC levied its new fine. So why is Microsoft facing that fine? The company has complied with the orders and is following the official timeline.

Something is obviously amiss in Brussels, making antitrust chief Neelie Kroes’ division look more like a kangaroo court than a respectable institution.

Bad Sprouts in Brussels

It is not justifiable to fine a company for work not done before the deadline for accomplishing that work has passed. Why the EC made this decision is unclear, but some newspapers, including the Wall Street Journal, have speculated the regulators wanted to leave for summer vacation, and they needed to deal with the Microsoft matter before they left. If that’s the case, Kroes and her entire division should be red-faced–or fired.

The appeals court will have yet one more piece of evidence that the case against Microsoft has been less about promoting competition and more about attacking a strong American company that has created innovative technologies its competitors would like to copy.

The European Court of First Instance heard the appeal of this case in April and is expected to issue a decision later this year or next year. The justices who presided over the case seemed to see through many of the EC’s arguments. The actions of the EC this summer should sharpen their vision even further.

Sonia Arrison ([email protected]) is director of technology studies at the Pacific Research Institute. This article is reproduced with permission of TechNewsWorld and ECT News Network.