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Microsoft's EU Antitrust Case: A Clearly Bad Precedent

This week, Microsoft dropped its appeal in the European version of the antitrust action against the company that has been proceeding for about ten years. The European Commissioner for Competition Policy Neelie Kroes notes that there are now "clear precedents" for enforcement of anti-competitive remedies levied against Redmond.

There are precedents all right. Very bad precedents, as we will see over the coming years as similar actions are brought (I predict) against other technology companies.

I have been skeptical of the antitrust actions against Microsoft for quite some time (see "Microsoft's best defense is a lack of a good remedy." USA Today, Nov. 23, 1998 A23 and href=",1540,2082040,00.asp">“A Tale of Two Microsofts” ).

In addition to the problem of finding a remedy that didn't cost more than the purported harm, I've also doubted the definition of the relevant market for which the company was being charged with dominant control (Intel-based personal computers--before Apple switched to Intel chips).

Still, here's Commissioner Kroes's crowing:

"The Commission's 2004 decision set a clear precedent against which Microsoft's anti-competitive behaviour could be judged. Now that Microsoft has agreed to comply with the 2004 Decision, the company can no longer use the market power derived from its 95% share of the PC operating system market and 80% profit margin to harm consumers by killing competition on any market it wishes.

Today's changes to the implementation of that decision set a second clear precedent. When Microsoft illegally uses its market power to destroy competition on a market, the onus is on Microsoft to change its business practices to allow competition and innovation to be restored to the market, so consumers are given the choices to which they are entitled."

Doesn't it seem odd to anyone besides me that the source of Microsoft's and other technology companies' market powers are monopolies granted by the very governments that are suing them for using those powers?

The granted monopolies, of course, are those that spring from intellectual property law--in particular copyright and patent. As I noted in an earlier post, the copyright grant to software (equal to that for literary works, including the never-ending extensions) is absurdly generous, especially since courts now recognize that software can be protected under patent as well.

Put another way, the same governments that grants excessive monopoly rights to technology products and services stand ready to use anti-monopoly law to remedy the natural by-products of the monopolies they grant.

No one seems to recognize the irony or the problem here.

Why don't we just give technology products, with their unique properties (including short half-lives, powerful network effects, zero marginal costs, and the unique combination of hardware and software that create a "virtual machine") protection that is more appropriate to their nature?

Which is to say, why don't we give them less protection, rather than giving too much and then trying to unscramble the eggs after the omelet has been served?

It might put a few Commissioners out of a job--or at least out of the self-righteous rhetoric business--but it would sure avoid a lot more of the "harm to consumers" that is supposedly being remedied.

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