European Commission annexes Microsoft

Two months ago, the European Commission issued a $357 million fine against Microsoft for allegedly not complying with its antitrust order. Prior to that, in 2004, the EU realized a handsome $613 million dollar windfall from the company. Somewhere in Brussels, some buggy whips must have needed gilding.

To help illustrate these numbers: that amount of money could pay 100 new bureaucrats a $100,000 salary for, um, 97 years.

Further, that amount does not include the 300 people that Microsoft has dedicated to complying with the EC, by writing voluminous documentation. Imagine if these folks were writing software or surveying customers or creating startups. There are good reasons that we don't want government agencies allocating resources, and this is a textbook case.

But that doesn't stop the EC from trying to justify it:

"Microsoft has told me they are now devoting substantial resources to compliance," Kroes said. "It is a great pity they didn't do this two years ago...If they had begun in earnest (then), the burden on Microsoft's staff would have been much lighter."

I am always glad to hear a powerful (and unelected) bureaucrat telling a private company how to organize its employees. Some might call it annexation.

All this despite the fact that Microsoft's are the most documented, reviewed, tested, deployed, hacked, probed and reverse-engineered products on the planet.

The commissioner felt it necessary to add:

"The launch of Vista [Microsoft's next major operating system] next year will hopefully take all this into account"

Put another way: that's some nice intellectual property you got there. Wouldn't want anything to, you know, happen to it.

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Today, we hear a rumor that Microsoft might delay the release of Vista in the European market. Why? For fear of crossing the authorities. And the authorities are dismayed!

The European Commission responded sharply, saying it was "misleading to imply that the Commission could be the cause of delays in launching Vista in Europe."

Actually, such hesitation on the part of Microsoft is perfectly rational. After paying nearly $1 billion in fines, based on an unelected commission's judgment of its products, this caution strikes me as the only reasonable approach.

Thankfully, there are still some folks in the EU who understand that it is consumers who will be hurt by all this:

European Parliament members brought the issue to a head Thursday with a letter to the commission expressing concern that the process could prompt a Vista delay in Europe. [...]

"It is alarming that one of the world's most successful technology companies considers the European Commission's attitude a 'risk factor' that might delay European companies' access to future Microsoft products such as Windows Vista," Chris Heaton-Harris, Peter Skinner, Sharon Bowles and Michal Kaminski wrote in the letter to Kroes.

And a substantial risk factor it is. The likely outcome is that European technology customers -- the ones whose opinions matter most -- will have to wait longer than the rest of the world when it comes to new innovations. And, big tech firms will think twice about investing in places where the EC has jurisdiction.

Microsoft needs to finish the product and get it out the door in those parts of the world where they will not be punished for doing so. Then, they need to circle back to decide if and when it is worth their while to release it in Europe.

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Addendum: In case you are wondering if I am some sort of MS shill, get over it. I use their products, I also use a Mac, plus a lot of Adobe stuff, Firefox, and of course their myriad online competitors such as Google. The crux of my position (not unlike my position on net neutrality) is that the value of technology can only grow via the interactions of creators and consumers.

Google asks no one's permission in refining its search algorithm; no one tells Adobe how to engineer Photoshop. Both are best-of-class products that have made the world a better place, and whose success rests entirely on their customers' opinions of them.

If you think that governments can successfully dictate the design of technologies and markets, I've got a Paykan to sell you.

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Update: John Carroll has a good take on this as well. He points out this important characteristic of antitrust law: an entity cannot know whether they are breaking the law beforehand.

Antitrust is NOT like laws against murder, or theft, or other "crimes" laws have been written to prevent. It's pretty easy to determine whether or not someone has been killed, or something stolen.

Antitrust isn't like that. Antitrust laws don't provide ANY guidance as to a standard by which to judge whether or not a company is a "monopoly," nor any rules - much less limits - governing what should be done once a company is declared a monopoly.

I suspect this will put Microsoft and the EC in increasingly awkward positions as Vista approaches. One of John's commenters calls such laws ex post facto and therefore unconstitutional, as well.

The EC is trying to play gotcha. They are saying that Microsoft has to comply with laws, but won't say exactly what the laws dictate or what compliance looks like. Maybe they are hoping for a post-Vista payday?

Comments

[The Gentle Cricket]

If I were MS I simply wouldn't sell to the EU at all. May be a small price to pay in the short term, but the lessons learned would likely lead to fewer repercussions in the future.

[goldendroplets]

"The likely outcome is that European technology customers -- the ones whose opinions matter most -- will have to wait longer than the rest of the world when it comes to new innovations."

Yes, but they will also have to wait for Vista to come out too.

[poub]

You don't get it if you deny that Microsoft uses a network of policies that guarantee it a close to monopoly position in numbers of area of the software industry. I’m glad there is finally a strong enough institution to put pressure on this company. And I think our economy have nothing to lose. Fist it doesn’t create that many wealth in the US compared to the profit it generate, and it doesn’t stimulate enough innovation, with its policies.