Europe Launches an Attack on Microsoft

Article published on April 1, 2004
community published
Article published on April 1, 2004

This article has not been vetted by an editor at Paris HQ

By imposing a record fine of 497.2 million euros on Microsoft, European Competition Commissioner Mario Monti not only created a sensational bit of self-publicity. He is also standing up to the American giant.

The European Commission's bold stand against the Redmond software giant is incurring strong hostility, most notably from the United States. The Commission's measures are "absurd" according to Bill Frist, Leader of the Republican majority in the Senate, and "regrettable" for Hewitt Pate, Head of the anti-monopoly division at the Justice Department. And yet, two years ago proceedings were begun against Microsoft on the other side of the Atlantic for the same reasons -"very serious and continuous abuses of competition law," with the intent "to oust market competition." according to a Commission document. In Washington, D.C. the Justice Department even considered splitting the software giant, a radical solution compared to the European ruling. But following an agreement with Microsoft the Bush administration dropped all proceedings.

A transatlantic squabble?

In an open letter to Mario Monti, 10 American elected officials said the US - not the European Commission- should decide what measures to take when it comes to American businesses. In an accompanying document two of the ten urged Europe to "rethink its position," because, they argued, "the decision will restrict access for American businesses on the European market."

Two competition philosophies

But the partisan bickering, splitting the US and the EU, sidelines the real issue of competition and how it should be regulated. Are the low prices, that Microsoft claims it alone can offer, really in the consumers' interest? Or would they better be represented in a competitive market place? The 497.2 million euro fine is just a detail, a drop in the ocean compared to Bill Gates's 50 billion euros networth. Plans by the company's lawyers to appeal their case to the European Court of Justice will probably delay payment of the fine for another four or five years. Other sanctions are more bothersome. One is Microsoft's obligation to divulge proprietary information to let competitors make their products Windows compatible. This will open a new market since 97% of personal computers run Windows. In no less than three months the company will also have to launch a Windows version stripped of its Media Player.

Longhorn in the firing line

Just a detail? Not really - the EU ruling attacks the principle of non-interoperability, which has been Microsoft's traditional cash cow and which has until now successfully killed off any real competition. These days computer companies rarely sell their hardware without Windows, which includes Media Player, leaving the customer with little choice and the company with a virtual control of market prices. The commission's Media Player decision introduces a legal precedent that will allow it to respond more effectively to future disputes, including "Longhorn", Microsoft's new generation Windows software due out in 2006. The solution is expected to integrate more software solutions which could further trounce competition.