European Union

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 ›

EU investigating Google privacy policy

Pietro Petrucci The European Union’s Article 29 Working Party has asked Google to justify its policy of keeping information on individuals’ internet searches for up to two years, according to EU Spokesman Pietro Petrucci. Google’s new policy is to anonymize its server logs after 18–24 months so searches can’t be identified with individual users. The EU itself requires that customer data must be retained “for periods of not less than six months and not more than two years from the date of the communication.” Only “traffic and location data,” not the “content of electronic communications, including information consulted using an electronic communications network” is required to be retained. Google is attempting to position itself on the right side of legislation Read More ›

EU targets Apple

European Union regulators think Apple should charge the same price across Europe for users to download content from iTunes. As it now stands, consumers in countries like Great Britain and Denmark pay a few cents more than their neighbors to download songs. Apple has been served with a Statement of Objections (basically an indictment). According to an EU press release, The Statement of Objections alleges that distribution agreements between Apple and major record companies contain territorial sales restrictions which violate Article 81 of the EC Treaty. iTunes verifies consumers’ country of residence through their credit card details. For example, in order to buy a music download from the iTunes’ Belgian on-line store a consumer must use a credit card issued Read More ›

Growth and Jobs for Europe?

EUROCHAMBRES, the association of European chambers of commerce, has a new report out measuring the EU’s progress achieving its ambitious plan of becoming “the most dynamic and competitive knowledge-based economy in the world capable of sustainable economic growth with more and better jobs and greater social cohesion, and respect for the environment.” Unfortunately, the report concludes that the EU is still losing ground. In two years’ time, the gap EU-US (sic) has widened for all economic indicators: Income (GDP per capita). The current EU level for income was achieved by the US in 1985. Since the first edition of the study, the time gap has increased by 3 years; Employment and R&D. Both the current EU levels for employment and Read More ›

EU vs. Intel

Staff at the European Union’s Competition Directorate are recommending formal charges against Intel, according to the Wall Street Journal. At the heart of the EU case are AMD’s allegations that Intel withholds rebates from computer makers when they buy too many AMD chips. “It is simply a coercive tactic,” Tom McCoy, AMD executive vice president for legal affairs, said this month. Forbes is reporting that AMD’s complaints include the offering of rebates to computer manufacturers for shutting out AMD and allegations that Intel has engaged in predatory pricing aimed at keeping AMD’s competing CPUs (central processing units) out of the market. Intel denies these charges. This could just be negative spin for volume discounts. Intel, or any other firm, offers Read More ›

New policy for the EU?

Speaking of the Streamlined Sales Tax Project, the European Union is embarking on the same type of tax harmonization project. It’s designed to protect member states who levy the heaviest taxes, and is being criticized by countries who fear they’ll be forced to raise their taxes to the detriment of their economies — Great Britain, Ireland, Estonia and Slovakia.
A 2002 study conducted by the EU found,

… neither Europe’s knowledge society in general nor its [information
and communication technologies] sector in particular are as strong as they need to be … Whether in patent applications, numbers of scientific researchers, universities’ standing in international rankings, numbers of Nobel Prize winners or references in scientific papers, Europe trails the US ….
Europe needs to dramatically improve its attractiveness to researchers, as too many young scientists continue to leave Europe on graduating, notably for the US. Too few of the brightest and best from elsewhere in the world choose to live and work in Europe.

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The games bureaucrats play

Bureaucrats aren’t clueless, so when one makes a comment the defies logic, like the following, it may mean something’s up:

It is misleading to imply that the commission could be the cause of delays,” said Jonathan Todd, the spokesman for the antitrust division of the commission. “It is not up to us to tell Microsoft what it has to do to Vista. The onus is on Microsoft to design its product in conformity with European competition laws.

Jonathan Todd, EU spokesman

The spokesman is referring to a comment from someone at Microsoft to the effect that uncertainty over how the EU will act is making it hard for the company to make some critical decisions on how to design its new operating system, Windows Vista. Microsoft asked for guidance from the EU and the EU has declined to respond, so it’s probably anything but misleading to say the commission could be the cause of delays.

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Article 82 Review yielding no results

EU Commissioner Neelie Kroes The EU Commissioner in charge of competition, Neelie Kroes, noted at the Korean Competition Forum earlier this summer that a Discussion Paper issued by the EU’s competition directorate on December 19th regarding the application of Article 82 EC Treaty to exclusionary practices has “met with wide interest” in the antitrust community and has generated more than 120 formal responses. Unfortunately, none have had any impact; Kroes repeated many of the same substantive policy observations she made prior to the Paper’s release — in September. For example: Basing antitrust on economics Before: As an economist, I want an economically sound framework. But as an enforcer, I need a workable and operational tool for making enforcement decisions. After: Read More ›

EU looks for exclusivity in high-definition DVD competition

Officials from the European Union’s competition directorate have been investigating whether the backers of competing standards for high-definition DVDs, including Sony and Toshiba, are stifling competition through exclusive contracts, reports the New York Times. The EU wants to know if studios are being pressured to favor a single format. The two formats have similar storage capacity, at the moment, and analysts report that the image quality is comparable. Yet the Blu-ray coalition, led by Sony, has persuaded more studios to adopt the Blu-ray standard even though the cost of a Blu-ray player — currently almost $1,000 — is twice that of an HD-DVD player. An analyst who was interviewed for the New York Times story speculated that Sony will be Read More ›