The European Union on Wednesday declared that Microsoft has abused the monopoly it enjoys on computer operating systems. The EU ordered Microsoft to reveal to competitors more of its Windows software code and to produce a version of Windows for sale in Europe that doesn’t include its Media Player software. Microsoft was fined a cool $613 million for its allegedly monopolistic practices.
This may sound like a victory for consumers. Not necessarily. The failure of EU negotiators to reach a mutually acceptable settlement with the company means the ultimate resolution of this case will be put off for years as Microsoft appeals the order. The EU decision clearly imposes some onerous rules on Microsoft, but it’s not so clear that consumers will get a big payoff.
This branding of Microsoft as a monopolist brings to a head the EU’s five-year antitrust case against the U.S. software giant.
The EU never threatened to break up the company, as the U.S. Justice Department attempted to do in its antitrust case against Microsoft. The 2001 settlement of that case over Microsoft’s bundling of its Internet Explorer browser forced the company to alter some of its business practices. But that settlement didn’t attack Microsoft’s ability to continue bundling the browser, and other new software features, into Windows.
If the EU ruling survives legal challenges, Microsoft’s cherished principle that it be free to bundle new features at will to benefit its customers will be seriously undermined. The EU ruling would directly affect only Microsoft systems sold for European consumers, but it would set a precedent in the continuing controversy over software bundling on this side of the Atlantic.
Microsoft’s competitors continue to argue that their own offerings are chronically disadvantaged. Microsoft’s products come bundled with Windows; the competitors’ products have to be added. Microsoft’s products work seamlessly with Windows; the competitors can’t match that ease of use because Microsoft won’t share the software coding for its operating system.
Microsoft had made a reasonable offer as part of a settlement to include three competing media players on Windows operating systems. The regulators, though, demanded that Microsoft strip its own media player from Windows. That was a deal-breaker. Doing so would lessen the value of Windows and other Microsoft features, company officials said. They have a point.
Ordering the company to share more of its underlying computer programming with competitors amounts to “the broadest compulsory licensing of intellectual property rights” in Europe in more than 50 years, said Microsoft general counsel Brad Smith. He has a point there, too.
Microsoft, given its dominance, should be pressed to make sure consumers have easy access to its competitors’ add-ons. If Microsoft saw that as a good practice, it probably wouldn’t have become entangled–for so long and at such great cost–with U.S. and European regulators.
But entangled it is. Although the EU has claimed victory, it should negotiate a compromise with Microsoft. The parties weren’t far from a deal that would benefit competitors and consumers–one that would benefit them now.
