EU

The EU Doth Protest Too Much

Yesterday, the European Union antitrust chief went on the

record denying that the EU was seeking a vendetta against Microsoft in its

ongoing battle with the company over alleged anticompetitive practices. I say

that the EU isn't nearly as interested in innovation and competitive choice in

Europe as it is of picking the pocket of a big bad American company.

The EU's behavior clearly indicates it's more interested in

fines and money than it is in truly fixing the 'problem' of Microsoft

dominating the software industry. The EU had settled with Microsoft over the

issue of opening up Windows APIs and bundling Windows Media Player in Windows

XP. On two occasions since the 2004 agreement, the EU has fined Microsoft

nearly a total of $1 billion. Since then the company and the commission have gone back and

forth about how Microsoft is supposed to 'behave' in Europe – to the point

where Windows Vista may be delayed in Europe to satisfy the government.

Now, I'm not saying for one second that Microsoft is an

innocent victim here. From the days when it redesigned DOS 2.1 with the motto

"DOS isn't done until Lotus won't run", Microsoft has a long storied

history of playing hard ball with its competition. Consider some ofthe

evidence:
  1. Netscape's browser being driven off the road of the information superhighway by an integrated Internet Explorer.
  2. OS/2 crashing and burning due to admittedly illegal bundling

    agreements with OEMs preventing IBM from getting OS/2 preloaded on new

    computers.
  3. The blatant rip-off of drive compression technology from Stacker when it wouldn't sign a licensing agreement with Microsoft for DOS 6.0.
  4. Modifying underlying Windows 95 code to display errors when DR-DOS was installed on a workstation.
  5. Creating undocumented system calls in its operating systems that its own applications could use to run more smoothly than competitors.

Clearly, Microsoft plays rough and will cut corners when it

deems necessary to get a competitive advantage. Put Bill Gates in a ten-gallon

hat, and he'd be the software equivalent of J.R. Ewing of Dallas fame.



The issue with the EU however isn't so much what Microsoft

has done wrong. It's what to do about it. The EU claims that sanctions in the

form of a billion dollars worth of fines over two years can help change the

competitive mind of a monopolist. Nevermind the fact that the fines leveled in

two years can be recovered by Microsoft in about two weeks. It's nothing more

than another cost of doing business at that rate. (Interestingly enough, the EU thinks that sanctions can work against

a monopolist seeking profit, but not a nation seeking nuclear weapons. But I digress...)



A non-technological analogy can be found in the

National Tobacco Settlement here in the US. In 1998, the tobacco industry agreed

to pay over $200 billion dollars over 25 years to states to help them 'recover'

the money they lost from the health care costs incurred by states as a result

of cigarettes. The states claimed they were interested in the public's health.

They claimed they wanted to help prevent smoking by hitting tobacco companies

in the wallet. Many states wound up spending the money on things other than

health care and smoking cessation programs. They proved that they were more

interested in the money they could get out of the tobacco companies rather than the true problem which

was smoking. They could use the cover of Big Evil Tobacco and the evils of

smoking to feather their treasuries.



The exact same thing is happening here. The EU (and now

other countries like South Korea) are looking at Big Evil Microsoft and its

questionable business practices and see a goldmine. They can self-righteously

attack a foreign company all in the name of innovation and smaller weaker

competition, while at the same time doing nothing to help the true 'victims'.

With a touch of demagoguery, they laugh all the way to the bank.



The proof? The EU won't give Microsoft clear guidelines

about what it can and can't do in Vista. Instead, it's waiting to leap out and

play gotcha after the fact. The fines aren't used by the EU to help offended

competitors. Real Networks may be used as cover, but they aren't seeing a dime

of the results. Neither is anyone else. And no 'innovation' has come from the

fines, except maybe from lawyers who are fighting the battles.



Government 'action' such as this won't solve the 'problem' of

Microsoft's domination. Smoking has decreased over time as a result of the

choices people have made, not as a result of money being siphoned to the

government. Likewise, Microsoft won't change its practices nor will its

domination end until consumers make different choices. 2007 will be an

important year for Microsoft with the shipment of Vista and Office 2007. And

for the first time, there will be serious competition in the form of Linux, Mac

OS X, and OpenOffice just to name a few.



The EU Commissioner said "Far from pursuing a vendetta

against Microsoft, the Commission's actions are guided by the desire to create

the most innovation-friendly business climate in Europe to the ultimate benefit

of European consumers." How again do European consumers benefit from

fines? By the higher prices caused by delays and the cost of the fines being

passed along to the consumer? You create an 'innovation-friendly business

climate' by attacking one business, but only reaping the rewards yourself and

not helping those who you're saying are being harmed? Changing the rules midstream, or not clearly defining the rules to begin with. and then sanctioning the offender?



If the EU was serious about the 'problem',

they'd place stiffer penalties on the company that would do some real damage or

even seek to break them up. Maybe they'd do like Massachusetts and get

Microsoft's attention by setting purchasing rules (in the form of OpenDoc

format support) which forced people to make software choices other than

Microsoft. At the very least they would issue some clear guidelines about the features in Vista and other Microsoft business practices that they don't like so Microsoft can do something proactively about it.

But they're not serious. They're not truly interested in competition

nor innovation. All they're interested in is an easy way to make a buck – or a

euro. If it comes at the expense of a big American company, so much the better. That kind of sounds like a vendetta to me.

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