EU v. Microsoft

Evolving theory of network effects

Should antitrust enforcers be concerned about entry barriers in the search ad market? Some believe the market exhibits “network effects,” according to the New York Times. Although traditionally applied to Industrial Age industries with high fixed costs like railroads and telephone exchanges, anything now exhibits a network effect if its value increases because more people use it. Network effects are “everywhere,” according to a top former antitrust official. Coke and Pepsi drinkers, for example, “benefit from the network of their fellow consumers because Coke and Pepsi are widely available in restaurants and in vending machines,” claims Timothy J. Muris. A preexisting network of vending machines is admittedly tough for soft drink imitators to replicate. But a barrier to imitation can Read More ›

Trade war

Picking up on Braden Cox’s recent post over at Technology Liberation Front, “Abuse of Power? Competition Commissioner that Pushes ‘Smart Business Decisions,’” it’s no secret that Europe’s software industry is years behind Microsoft, and not surprising the industry is seeking help from politicians in Brussels. When Kroes, a politician, talks about open standards one must assume she is referring to the European software industry, not to the open source movement generally. Of course, for the moment “the enemy of my enemy [may be] my friend,” as they say. In her remarks last week Kroes said, “I know a smart business decision when I see one — choosing open standards is a very smart business decision indeed,” Ms. Kroes told a Read More ›

Here’s a tip for promoting innovation through “competition” law: Define market to get results you want

Microsoft Windows now represents 34.2% of the server market according to the most recent statistics reported by IDC this month. Microsoft is considered a “dominant” company in Europe only because the European Union measured “price band” and “workload” so it could carve the market just so, isolate a particular segment and report that its intended victim, in this case, Microsoft, has a share of “at least 60%.”
Richard Rahn pointed out once that, “If you define products and markets too narrowly, you will see all types of monopolies where, in fact, none exist. You may find Ford Motors has a 90 percent market share for 4X4 pickup trucks in a certain weight category in the color red in Albany County, GA.”

Using statistics compiled by IDC, the EU focused only on servers costing less than $25,000 — the “low-end server market” or the “volume server market.” This happens to be the segment in which Microsoft performs best. The EU concluded that Microsoft’s share of this segment of the market was 61.0%. Next, the EU noted that looking only at price band would obscure the fact that some servers are devoted to specific tasks outside work group networks.

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EU fining successful American companies

The European Union’s first financial penalty against any company for defying antitrust orders, according to the Wall Street Journal, was levied against an American company in the amount of €280.5 million. When politicians have to deliver disappointing news, they like to employ nuance. Take, for example, the EU’s Commissioner in charge of competition, Neelie Kroes, who visited Washington, D.C. in March and began her comments to a group of antitrust lawyers with: “I am sure you are aware, the top priority in Europe at the moment is to boost the number of jobs and the quality of the jobs. Competition policy has a lot to contribute to this agenda…” Then there was the visit Kroes made to New York last Read More ›

Microsoft v. EU, Part 1

Microsoft’s legal challenge to the European Commission’s antitrust ruling got underway this week in the European Court of First Instance. At issue on the first day of the hearing was the requirement that Microsoft separate its media player from its operating system. The commission’s ruling and subsequent enforcement gets more absurd every day, and I can’t imagine it would have been taken seriously by any competent court of law in the U.S. Jean-Francois Bellis, an attorney for Microsoft, told the court that 1,787 versions of Windows without Media Player (Edition N) have been ordered, compared with 35 million versions of Windows with Media Player, the Financial Times reports. The lawyer for the European Commission conceded that “I am afraid we Read More ›

EU Treating Microsoft like a Utility

Microsoft has been warned by Commissioner Neelie Kroes of the European Union that there are some features it should not bundle into its new operating system (see, e.g., “European regulator warns Microsoft about new operating system“ from European Business News Online). The EU’s competition directorate has already decided that competition could be costly and involve risk for Microsoft’s competitors. Yes, it sounds ridiculous — but essentially that’s what it is. Kroes’ warning may indicate that Microsoft is losing its freedom to innovate and in effect will now be required to obtain preapproval from the EU for any new product design. If so, the EU could be doing to Microsoft what the FCC did to the Regional Bell Operating Companies by Read More ›

EU Threatens Innovation in Action Against Microsoft

Microsoft’s work group server competitors claim they can’t keep up with the complexity of Microsoft’s product upgrades.

“We are, in many fields, ten years behind Microsoft. And the lag is growing with every new step Microsoft takes”

according to Volker Lendecke of the Samba Users Group, an organization dedicated to free software that anyone can copy.

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