EU’s Microsoft court decision: European consumers, Microsoft shareholders pay the price
Posted on September 17, 2007
Working at the torrid pace that typifies the Common Market, a first-level European Union (EU) court on September 17, 2007 upheld the EU Competition Commission’s 2004 findings based on a 1998 complaint by Sun (JAVA). It said that Microsoft (MSFT) did indeed need to take steps to increase interoperability between its Windows-based client operating software and other providers’ servers, and to offer a Windows client version without Windows Media Player. Microsoft did not say whether it would appeal but my guess is we should now stand by for the next big blast of related news in a little over a year, which will be a nice round decade after the initial complaint was filed.
Because both of the things EU Competition Commission asked for in 2004 have happened already, because Microsoft’s legal counsel has said for years that he thinks of Commissioner Neelie Kroes like a big sister, and because Microsoft has long ago reserved against the fines levied by Commission (less than a billion dollars and likely “paid for” with cheap Euros), it appears the remaining items of real importance to the information technology (IT) market is how the related open source software (OSS) issue is resolved and whether the EU approach applies worldwide.
On the worldwide aspect, the court’s press release says the 250-page opinion says “The Court considers that that practice enabled Microsoft to obtain an unparalleled advantage with respect to distribution of its product and to ensure the ubiquity of Windows Media Player on client PCs throughout the world…” What place the EU has in analyzing worldwide markets and their competitive implications have implications for every manufacturer of any type of product, not just IT, that wants to do business with the Europeans. For more detail on the OSS aspects, see my opinion over at ebizQ.net.
In the meantime, European consumers have already paid a “tax” for their use of Microsoft products in terms of higher prices. It just doesn’t look like other business-stifling EU taxes. Instead Microsoft collects the tax and passes it back to the EU in the form of a fine.
But Microsoft shareholders are also being as poorly served by Microsoft as the EU consumers are by their politicians. Microsoft shareholders have to put up with this near decade-old distraction for at least another couple of years. Unlike American politicians and competitors, most of whom settled the same issues in 2001, the EU commission has not constructively discussed procedures with Microsoft and the EU keeps increasing the threat level. I say “Microsoft, get out of Europe. Let the Eurocrats continue their slide down their innovation-stifling rat hole of regulation.” Microsoft should spend that money in vibrant economies like India and China where this century’s innovation will take place, not where the 19th century’s innovations took place.
But Microsoft spokespersons today were full of all the usual platitudes about the EU laced with attempts to buy its way out. It emphasized its spending of a half a billion in R&D in Europe in FY 2007, up from basically zero in 1998. Of course, that is not organic growth; it is mostly because Microsoft acquired Navision in 2002. Oh how I wished the EU Competition Commission had opposed that bad Microsoft investment.
–Dennis Byron
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