The Informationist

The EU Fines Microsoft

I figured that as long as I’m in the EU, I should probably share a few thoughts about the EU’s decision to levvy a €280.5m fine against Microsoft. So here’s a quick thought.

The European case against Microsoft stems from business practices similar to those that had been at stake in the U.S. case, but relating to different (and later) products. While the U.S. case was concerned mostly with web browsers in Windows 95, the Europeans have looked at media players, servers, and other interactions between later versions of Windows and other software. The specifics behind this week’s fine, though, deal with remedy orders and compliance. They also raise a number of issues likely to be with those of us who follow technology businesses for quite some time. Over the years, the EU has ordered Microsoft to license some of its products to its competitors. The problem with software licenses, though, is that without suitable documentation and training, software is tough for even qualified professionals to understand. So the EU has also ordered Microsoft to spend time and money developing manuals detailed enough to make its licenses meaningful. Therein lies the heart of the problem. The patent, copyright, trademark, and trade secret protections that we give to software providers gives them enormous flexibility in leveraging their products to disadvantage competitors--more flexibility, in fact, than manufacturers have in ANY OTHER industry. Microsoft has used this flexibility to great effect. Antitrust enforcers on two continents have tried to use antitrust law to counter this grant of powerful intellectual property rights. No matter how hard they try, though, they seem to discover that it just doesn’t work. Antitrust is an after-the-fact fix. As long as we give software companies extraordinarily powerful intellectual property rights, we empower them to alter the competitive landscape of their industry. (Though Microsoft works in the high profile consumer software markets, there have been reports of smaller companies behaving comparably in in smaller niche markets). Antitrust remedies can’t really fix this problem; at best, they can make life a smidgen more difficult for violators. The underlying problem is inherent in the system. I discussed many of these issues in detail in Digital Phoenix.

Posted by Bruce Abramson from on 07/13 at 05:45 AM in The Not-Quite-Yet Information Economy