Coverage of the Microsoft anti-trust defeat at the hands of the European Court of First Instance, is wide of the mark and largely jingoistic, with US professors, legal and trading groups all saying that it will all hurt consumers in the end, complaining that a US company cannot compete fairly if it is under constant scrutiny and this means it is handicapped in new markets.
Some even go further and say that this plays to the hands of Google and Apple and that it will hinder competition and help create new monopolies, implying somehow that a new monopoly is worse than an old one.
Another voice, Jonathan Zuck, the president of the US Association for Competitive Technology, a Washington-based lobby group was reported as saying ‘What the court is basically saying is that if you develop a successful product and get too big, the European Commission is going to force you to give away your intellectual property.’
The people saying these things should really take a long hard look at themselves and their markets and what creates competition.
Microsoft still has one more court that it can appeal to, but this decision comes from the second highest court in Europe and was about turning down Microsoft’s appeal against the 2004 judgment by the European Commission,
The Court effectively agreed that Microsoft failed to supply competitors enough information to connect with its servers and threw out Microsoft’s claims that this was its intellectual property. It also agreed that bundling the Windows Media Player with its operating system was also illegal and thought the €497 million (at the time some $603 million) was fair. However it removed the requirement that Microsoft needed a European Commission trustee permanently on board.
Back in March 2004 we said that the European Commission had pulled its punch and that Microsoft got off extremely lightly and we stand by that and the logic is simple.
If any company has a monopoly, anti-trust laws are created to stop it using its monopoly to get another monopoly on a new market without innovating, and selling hard against rivals. In the manufacturing world it is considered that subsidizing a product through a monopoly, and offering it for less than it costs to make, it an act of anti-trust, so why doesn’t that logic stand up with software?
Microsoft was not even forced by the Commission to put a consumer price on its Media Player, a move that would have been totally in line with anti-trust principles, although not with anti-trust practice as it has been practiced in the US.
Microsoft has always been in the habit of bundling its offerings to crush rivals. It bundled the navigation we get with Explorer, copied from a separate program written by an entrepreneur, and gave it away free. It copied compression software from Stac Electronics in the 1980s, a fact that was proven in court, and offered its own bundled compression utility after unsuccessful negotiations with Stac. Microsoft has since bundled Internet Explorer to destroy Netscape, and then the media player which also has digital rights management bundled, making it virtually impossible for any PC based DRM to get off the ground, because the perception is that it has to be priced at nothing.
The company has copied its way to where it is today and that stifles competition not only outside of Microsoft but within it. We’ve met with hundreds of innovative Microsoft employees over the years, but when strategy is dictated from above, that markets are to be stolen from their inventors by the simple act of copying an innovative product and offering it for precisely nothing, there is little incentive for quality software with genuine innovation.
Even Vista is a copy of the feature set of the Mac’s Tiger OSX and Apple has long been the unofficial R&D arm of Microsoft, just as the Windows NT operating system for servers inherited huge amounts of source code from Digital Equipment Corporation, when Dave Cutler, who wrote the VMS and RSX-11 operating systems for DEC, was tempted over to Microsoft and brought some ideas and some code that DEC owned.
The story goes on and on, Visicalc, Lotus 123, every email program ever written ‘ they were all truncated by illegal subsidy from Microsoft’s PC operating system revenues, and the US in particular and the world in general, has suffered for the loss of innovation which that created. But more importantly Microsoft’s internal competitiveness has suffered, along with its ability to spot a good idea. And that’s the reason that it has failed to win against the iPod and Google search.
Microsoft needs to begin taking a new tack. It’s share price has remained virtually unmoved in over 4 years. Investors will not be attracted to the status quo. Certainly the $600 million fine will do it no harm, neither will the need to remain cautious on the subject of future bundling and Americans have to realize that a US technology economy that is stationary is a sitting target for a rampaging Chinese economy.
Those of us with long memories will also be able to see the parallels in IBM’s history, when it too was taken to task by Europe, after winning out in a US anti-trust show trial. It was almost at the point where it could no longer design a decent chip or computer, and unable to respond in new markets like the minicomputer or the PC market, and instead it focused on beating up its rivals with bundling propositions and by inventing future products, announced two to three years out, which froze the market. We called that Fear, Uncertainty and Doubt, and it based its existence on FUD economics for almost two decades, while dominant. It took new management and a purge on older ways of doing things before IBM could find its feet once more. Microsoft simply needs the same treatment.