Microsoft Gets Euro-Trashed
January 14, 2005
by: Tom Finnigan

Wastewatcher, 5-Jan

Last month a European court handed down a senseless decision that will have far-reaching, damaging consequences for prices and innovation in Europe and the U.S.  The European Court of First Instance (CFI) rejected Microsoft’s petition to delay sanctions imposed by the European Commission (EC) until an appeal on the merits is addressed.  Although the decision was written in French, in plain English that means Microsoft must comply with expensive antitrust penalties even though the original ruling against the company may be overturned.  In addition to damaging Microsoft, the ruling hurts small software developers, discourages innovation worldwide, and does nothing to benefit consumers or taxpayers.

In March, 2003, the EC issued a decision requiring Microsoft to hand over valuable intellectual property to its competitors, unbundle its software, and pay a $666 million fine.  For now the company must comply with the EC’s pernicious remedies, including having to create two versions of Windows, one with Windows Media Player and one without.  Litigants argue that bundling gives Windows Media Player an unfair advantage over other media players. 

But, the EC agreed with Microsoft’s argument that the media player has no economic value so the two versions will be sold at the same price.  This is where common sense comes in and the case against Microsoft starts to unravel.  There is no evidence of a consumer demand for a non-Media Player version of Windows.  Anyone who was around during the dawn of the computer age can recall when operating a new computer required the purchase of various software programs and incompatibility was a constant headache.  Most new computers come installed with all the software needed to perform essential tasks. 

Consumers want integration, and companies should not be punished for enhancing products with additional user-friendly features.  Consumers who are unhappy with Windows Media Player can easily dowload a free alternative from a number of competitors.  The EU might as well tell KFC to “unbundle” its gravy from its mashed potatoes.  

Hardest hit by the CFI’s decision will be small software developers who will pay billions of dollars to design software for two versions of Windows.  Even the EC agrees that the non-Media Player version will cause some applications to fail.

Forcing Microsoft to give away its source code is piracy by litigation.  The decision overturns legal precedent and offends the U.S. Constitution’s protection of intellectual property.  It is another example of the EU trying to make up for its economic ineptitude and will open the door for other competitors to tie up the courts and waste tax dollars by suing successful companies.

The EC’s meddling in the marketplace is a dangerous setback to global economic growth.  Companies will have no incentive for designing new products if they have to share their information with competitors.  If American companies are forced to alter their products depending on the buyer’s location or on the whims of unelected Euro-crats, international trade will be severly hamptered.

The most ridiculous aspect of the CFI’s decision is that it allows the penalties to go into effect while recognizing the core strengths of Microsoft’s arguments.  The only sure consequence for consumers will be added inconvenience.   By forcing Microsoft to comply immediately with sanctions that may be repealed, the CFI is skewering the global marketplace with burdensome regulations and hurting taxpayers with costly litigation.  This precedent stymies innovation and undercuts intellectual property rules for all successful companies.