The EU Microsoft Decision(s)

The decision(s) handed down by the European Union Court of First Instance this week have brought cheers from MS competitors, for historically good reasons: all of them have found themselves deprived of access to data or procedures (API calls, etc.) which hobbled them in the marketplace, vs. MS’ own product offerings, the latter of which were often derivative, reverse-engineered, or plain copies of others’ work.

On this basis, which is the only one discussed in news I’ve seen in the last day or so, MS deserves to have lost the 2004-based case and appeal.


There is more to this finding than meets the eye, and, in the end, I think the EU has made a serious mistake in its findings.

First, let’s separate the two complaints, since they are radically different from each other.

In one, MS is accused of bundling its media player, for free, with its OS, thereby harming the economic prospects of competitiveproducts such as RealNetworks.’ (There is a side claim that MS also prevented Real and others from obtaining proper technical access that would allow their products to perform on a technically flat competitive landscape.)

In the second, MS is accused of preventing server software interoperability by competitors, again by not releasing complete (or useable) documentation for achieving a technically flat competitive landscape, and / or for charging for this data, when, because of its monopolistic status, the data should be free.

I think there is little question that MS, as a monopolist in operating systems, is beholden to provide the data described above. To the degree that, then or now, it has not or does not, it should pay the remedies and change its behavior. This, after all, is the cost of being a monopolist.

On the other hand, the EU appears to be ruling that bundling of new products is, a priori, somehow illegal. Worse, according to reports from Nellie Kroes and others, the fact that MS gained market share in server software during the last three years is taken as proof of illegal activity.

This is both illogical, and legally wrong.

There are three reasons why MS may have legally gained share, and none of them were addressed publicly by the court or its officers (I have not read the “War and Peace” doc from the court, and ask for forgiveness if in fact such issues are addressed within).

1. The product is free as bundled. Customers will always prefer “free” over not free products, and accept them.

2. The product is made by the same engineering team. Customers will always tend to prefer products made by the same team, since it implies fewer interoperability issues, a huge and important customer benefit.

3. The product is supported by the same team. Similar but different from 2, this means that future security patches, updates and versions will all (theoretically) work together, something generally not true for separately sourced products.

The court is about to find itself ruling against monopolies being allowed to ship either any new products, or any new competitive products, and there is no legal basis for such a position, either in Europe or elsewhere.

The court is also about to find itself ruling against monopolies gaining market share, whether in old or new markets, and again, there is no legal basis for such a position, either in Europe or elsewhere.

Because of this danger, the court, in my opinion, has put itself into a position of serious legal jeopardy. Worse, it makes the EU itself appear anti-US, or in some other way (anti-MS?) vengeful, rather than wise.

Of course the competitors are cheering, but they’ve had a rough time from truly illegal behavior.

Both they, and the EU, should be aware of the danger of the current finding.

What should MS do? I would recommend that they do just as they have done in the last couple of days: appear and act contrite in general, pay the fines, accept most of the legal blame being sent their way – and then challenge the court in appeal, on the issues raised above. Monopolies can make and bundle new products, and monopolies can gain market share.

If the courts choose to fight them over either question, MS will ultimately prevail, and the EU will come out looking like trade warriors instead of fair judges.