More Anti-Consumer Regulation

We seem to be getting these stories in batches lately (others here and here) but leave it to the EU to trump even San Francisco in anti-consumer stupidity:

Microsoft lost its appeal of a European antitrust order Monday
that obliges the technology giant to share communications code with
rivals, sell a copy of Windows without Media Player and pay a $613
million fine - the largest ever by EU regulators.

The EU
Court of First Instance ruled against Microsoft on both parts of the
case, saying the European Commission was correct in concluding that
Microsoft was guilty of monopoly abuse in trying to use its power over
desktop computers to muscle into server software.

It also said regulators had clearly demonstrated that selling media software with Windows had damaged rivals.

"The
court observes that it is beyond dispute that in consequence of the
tying consumers are unable to acquire the Windows operating system
without simultaneously acquiring Windows Media Player," it said.

"In
that regard, the court considers that neither the fact that Microsoft
does not charge a separate price for Windows Media Player nor the fact
that consumers are not obliged to use that Media Player is irrelevant."

Yes, you are reading it correctly.  Microsoft is being penalized for giving the consumer too much value by bundling in additional features and programs for free into its OS.  And just to make sure that you understand that this has nothing to do with the consumer, but is purely a complaint of large competitors that can't keep up, they make it clear that they want the bundling stopped even if it does not change the price of the OS one penny (pfennig or whatever the Euro equivalent is).  They want the product stripped down and are deliberately trying to reduce its value to customers.

Gwynnie at Maggie's Farm has a funny comment, saying, "Microsoft is guilty of succeeding while American."

  • Iblis

    I love free markets as much as anyone and more than most, but have to disagree with you (and the editorial staff of National Review) on Microsoft. They don't play fair and the EU was right to say so.

  • http://www.google.com ErikTheRed

    I'm going to have to toss my hat in with Iblis on this one - Microsoft broke the laws in the US and EU, and they got caught. I'm all for a free market because it's economically efficient and it creates choice and competition. If a company uses illegal means to create a monopoly position (again, found guilty on two continents) then I don't have any problem with the governments stepping in and taking measures to try to restore a competitive environment. If Microsoft had established its dominant position strictly on the merits of its products (I could pass out laughing at that one), I'd be more sympathetic to their cause. Like I was with Intel vs. AMD in the pre-Athlon days - Intel had great products at the time, and deserved their dominant spot. Then they released the Pentium 4 (which was crap - hot and slow), AMD released the far superior Athlon, and the market sorted itself out. Microsoft, on the other hand, got fat and lazy early on and used things like illegal bundling to keep competitors from gaining a toehold. To be fair, Microsoft did some things right (especially developer relations) and would have been a major player regardless, but more likely with a 50 - 65% share rather than 95%.

    And one important correction: They aren't required to share any code. However, as part of their penalty they are required to publish the information necessary to allow third-party products to interoperate with their CIFS protocol (used for file & printer sharing, Active Directory access, and some other stuff). In other words, the remedy is pro-competition.

  • http://highwayx.wordpress.com Highway

    I don't know. Someone will have to explain how adding value to their product, which did not preclude others from offering competing products (Winamp, Firefox, RealPlayer (ugh)) was illegal bundling. I fully understand that Microsoft is way up there in the 'shady deals' department, like requiring their OEM resellers to pay for a copy of Windows with every system sold, whether or not the customer wanted Windows or not, a cost that was passed directly on to the customer. Or giving privileged deals to certain OEM's that agreed to not sell competing products. Or the history of the Windows JavaVM.

    But I don't see how Microsoft leaving Windows Media Player out of Windows would help anyone except the makers of those competing products. And that's what makes rulings like this not for the consumer, but for the competitors. They can't get their way by making a significantly better product, so they get their competition strangled.

  • http://www.google.com ErikTheRed

    Someone will have to explain how adding value to their product, which did not preclude others from offering competing products (Winamp, Firefox, RealPlayer (ugh)) was illegal bundling.

    It can be argued that one person's illegal bundling is another person's added value. But the real value here was not to the consumer - Windows Media Player (WMP) was (and is) a proxy in another business battle - control over dominance of Digital Rights Management (DRM, or more accurately, Digital Restrictions Management) and content distribution. Microsoft was requiring computer vendors to include WMP and at the same time prohibiting them from pre-loading competing products. Same thing with web browsers - for many years vendors were prohibited from pre-loading Netscape or Firefox (or Opera or whatever) onto the machine. Officially, this was because it would alter the pristine Windows desktop and would confuse and befuddle consumers. No, I'm not making this up.

    But these Media Player and Browser things are silly, piss-ant battles. The real illegal bundling problem occurred back in the days of Windows 3.1 and Windows 95, when there actually were a few competing Graphical User Interfaces in the PC world. Microsoft basically told system vendors that they had to purchase a license for Windows for every machine they sold (even if they sold it with a competing GUI) or they would have to pay exorbitantly higher licensing fees. Back in the Windows 3.1/DOS days, this basically meant they couldn't afford to sell DOS and would therefore be out of business. And if they complained to the government, they'd get shut out entirely. Super-mega-double-plus illegal? You bet.

    They got away with it because Microsoft had, in effect, hacked the legal system. They had figured out that even if they were found guilty, by the time the wheels of justice had ground through their course the problem would be irrelevant. The tech world moves too fast. The DOJ began probing Microsoft in 1991, wound up with a hung commission in 1993, started the case up again in 1998, and was finally settled in 2001. By this time, any GUI / OS competition in the PC world was pretty much dead and buried. The only good thing is that the DOJ settlement has forced Microsoft to, by and large, lay on the illegal bundling at the OS level. As a result, Linux has grabbed a huge chunk of the server market and will eventually dribble into the desktop. It will still take at least another 5 - 10 years for things to start to balance back out, competitively speaking.

  • http://www.steamstreet.com WhatAboutSteve

    While I understand the argument, it falls woefully flat because competitors are not required to do the same thing. If Microsoft is not allowed to bundle Windows Media Player, why is Apple allowed to bundle iTunes? For a customer of Apple, this is 'added value' but for a customer of Microsoft it's 'anti-competitive'.

    The goal of anti-trust is to level the playing field, not tilt it against the incubent.

    Furthermore, I think the market _has_ in fact played its role effectively. By any measure, the judgements against Microsoft were pretty insignificant, yet I think it's clear that since that time, Microsoft has become much less powerful. Competition and a changing market shifted the balance of power.

    But don't worry... the anti-trust courts should get ready for Google... it won't be too long now.

  • ErikTheRed

    @WhatAboutSteve - You're missing the point. Apple makes the computer and the operating system and sells them as a complete unit. There are no third parties being pressured here. The PC manufacturers build the computer, and then purchase and bundle a license for MS Windows with the product. So far so good. There are two complaints against Microsoft's behavior here. The first (which I'm not too worked up about) is that Media Player (and Internet Explorer before it) are separate product and the PC manufacturers should have the option to bundle them or not. IMHO, whatever - let them compete here. The second complaint (which bothers me more) is Microsoft's prohibiting vendors from pre-installing competing media players, web browsers, etc. That's anti-competitive and bad for consumers and the economy in general.

    Yes, the balance of power has shifted - it started right after Microsoft settled with the US DOJ and was prohibited from using these tactics and not a minute before. I know there are some absolute puritans in here that believe all government intervention in the market is bad, but I personally think that there are a few extreme cases where it makes sense to intervene - and this was one of them.

  • http://kurifuri.com/ Chris Fritz

    Ah, if only I were European and had a voice in the EU. Maybe I could get Microsoft to cough up another bajillion for illegally tying in the desktop and filesystem. After all, how can anyone complete in these fields? What if I want to use another desktop and a different filesystem on top of the fairly stable Windows XP kernel?

  • http://www.two--four.net/weblog.php Billy Beck

    "The second complaint (which bothers me more) is Microsoft's prohibiting vendors from pre-installing competing media players, web browsers, etc."

    That was a matter of contract: those vendors made that choice voluntarily. You are couching it ("prohibition") as a matter of unilateral force and it simply isn't true.

  • dave smith

    Also, this cannot be consided in anyway an "extreme" case of "anticompetitive" behavior. There are many media players available for free that a user can obtain in minutes.

    As a consumer, I don't consider a web brouser and media player as separate from the operating system. I expect my computer to do these things out of the box without any effort on my part.

  • http://www.hodakvalue.com/blog M. Hodak

    This isn't the same court that decided the right to self-incrimination should be forfeited in Europe,

    http://www.hodakvalue.com/blog/2007/07/the_right_against_selfincrimin.html

    ...but it's clearly a kissing cousin.

    While certain antitrust prosecutions may seem reasonable, the remedies in this case strike me as so arbitrary (anti-consumer, even) that you have to ask yourself: If that's the best they could hang Microsoft on, was this prosecution worth it? And if this is the best that antitrust prosecutors can do, is it worth it for them to have all that power they say they need to bring 'monopolists' to account?

  • dearieme

    The EU is Vichy France by other means.

  • Walter E. Wallis, P.E.

    I have asked my senators to get a law that requires European fines to be paid only from European sales.
    The original anti trust action killed the dot.com boom.

  • markm

    Erik: The slow pace of the courts was only part of the problem, the main thing was the Justice Department missed the point. They ignored that forced bundling of MS operating systems with motherboards, and went haring after the bundling of Internet Explorer - and "won" that without accomplishing anything, because in the several years that were required for a hearing, decision, re-hearings, and appeals about that, (approximately '95-98) MS had re-written Windows so IE was an integral and inseparable part. In W98 and up, it can be turned off but not removed. Not that it matters much at this point, even at a slightly negative cost (that is, it's free and it takes time to disable it), IE is losing to other browsers whenever someone becomes aware that there are other choices.

    OTOH, Microsoft never was ordered to stop forcing OEM's to ship Windows with every PC or pay a whole lot more per copy, and AFAIK that practice continues today. Ask for a PC shipped with Linux installed and running, and find out about that... Linux is currently pretty competive on features and ease of installation, and it's free, but computer makers can't take advantage of that unless they become 100% non-MS shops.

    Of course, the second thing the "free" software movement really needs at this point is for the software to be sold through a corporate cover - because corporate buyers are uncomfortable with it otherwise. I fail to see why they'd ever tolerate the standard MS licensing agreement (What you bought isn't yours, it's ours but we'll let you use it as long as we feel like it, we are in no way responsible for defects, and we have added "features" to the software such that whenever you upgrade your computer you have to come to us for a new key to keep your, we mean our, software running) but for some strange reason they prefer it to actual ownership of a free copy of a free product.

  • markm

    Dang, I'm sure there was a closing tag after "motherboards". Did I slant the slash wrong way?

  • markm

    < \i>Backwards slash?