Monday, September 17, 2007

EU vows end to Total World Domination

Today an EU court (roughly equivalent to the US Court of Appeals for the Federal Circuit) reaffirmed the March 1 administrative ruling against Microsoft seeking sanctions over Microsoft’s alleged noncompliance in its 2004 competition policy (antitrust) case, including the original €0.5 billion fine. The usual round of Microsoft enemies applauded the ruling. Notably absent from the cheering was Apple, which Microsoft threatened to put out of business 10 years ago as part of a negotiating tactic.

In fact, Fortune argues that Apple and Google are next, while Information Week adds Intel and Qualcomm to the pile. I’m not completely sure whether this is a realistic legal prediction or merely intended to stir up nationalistic resentment against Eurocrat meddling.

Certainly, if the standard is “fails to provide interoperability with a proprietary technology,” then there are a wide range of successful IT companies (nearly all American) that could be targeted, although claims of total world domination most often list Microsoft, Apple, Google and sometimes Qualcomm.

I have mixed feelings about this — I think interoperability is good but have an economist’s skepticism about government intervention. But one quote from the Information Week article set off all the alarm bells, as I find myself (for once) agreeing with a Microsoft lawyer:

“A significant drop in market share is what we would like to see,” European Competition Commissioner Neelie Kroes said at a news conference Monday. “When we observe a situation where one producer has a share of 95% of the market, it’s a monopoly. It’s not just a monopoly-like situation.”

In response to a question from a reporter, Microsoft general counsel Brad Smith bristled at Kroes’ words. “These are rules that speak more to how one competes more than who should win the race,” he said.
This is not an arcane philosophical debate, but a basic question of whether the government sets rules or whether the government determines outcomes. If Republicans still held the US Congress, there certainly would be official complaints (beyond a few Microsoft friends and some Libertarian-leaning activists) about the extra-territoriality of the EU action setting global constraints on a US company.

Twenty years ago (or even 14 years ago), such interoperability complaints were targeted at IBM. Today compatibility with IBM proprietary standards is only a slightly higher priority than compatibility with French or German ones.

I’m sure that the Microsoft situation will correct itself in the not too distant future. Apple will gradually lose its music domination (which is mainly in the US) after everyone gangs up on it. Google’s start is still ascendant, so I’ll probably be in the nursing home by the time people start to write it off. (Sergei and Larry won’t be collecting social security until after 2040).

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