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Microsoft is not happy

Operating system giant Microsoft Corp. (MSFT) became the first high profile victim of aggressive European Union antitrust enforcement (but it would not be the last).  Slapped with almost $2B USD in fines, the company was lashed for browser bundling and other tactics viewed by the European Commission regulators as anticompetitive.

Microsoft appealed the fine, but the results were less than what it was hoping for.  The appeals body -- the General Court of the European Union announced [PDF] this week its decision to cut the €899M fine to a mere €860M ($1.1B USD), a reduction of €39 (~$48M USD).

A Microsoft spokesperson told Reuters it was "disappointed with the court's ruling."

With the appeals exhausted, it now appears Microsoft will have to pay up to preserve the billions in yearly business it gets from the EU.  The ruling is the latest setback for Microsoft in Europe.  

The company has suffered from plenty of bad PR in Europe in the wake of UK court proceedings which detailed a sexual harassment by managers.  The incident led to several resignations and several civil suits, placing Microsoft squarely in the crosshairs of the EU state's active tabloid industry.

Sources: General Court of the EU [PDF], Reuters



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Misplaced patriotism
By ZorkZork on 6/28/2012 6:22:27 PM , Rating: 5
It is pretty impressive to see the patriotic remarks in support of Microsoft. Microsoft has a +90% market share in Europe – in essence a monopoly. Thus all references to other desktop operating systems and what they should do is meaningless. Others do not have a dominating market position. Microsoft also has a near monopoly on office applications so look forward to seeing Microsoft in legal troubles if they restrict others (e.g. mobile devices) from accessing Office/Exchange data or start including Windows Phone features in shipped versions of Office. Same thing if they make a Windows Phone Office add-on and prohibit others from making similar office add-ons to support another mobile OS.

Microsoft is using its Monopoly like position to advance its browser market share. It knows that a large percent of the users will use whatever browser they first touch and never think more about it. It doesn’t matter that IE is free. The only reason why Microsoft is investing in IE and giving it away for free is to advance its other business. Price does not matter. Same thing with Google, Gmail is free but still falls under the EU competition laws.

Microsoft has to give its competitors the same ability to distribute their browsers with windows as they themselves have with IE. If IE is in the box, then Safari, Chrome, Firefox, Opera, etc. must be in the box too. The only advantage the OS is allowed to give Microsoft in the browser competition is the “Microsoft reputation”. This is because the court sees a browser as a product separate from the OS (which something we can argue long about is and I believe today it is not clear cut but when the case started it was different). Microsoft is not allowed to use a product that have a dominating market position to leverage another product.

Under EU law (and US) fines imposed must be proportional to the crime and gained advantage. Thus, if bundling IE helped Microsoft maintain their +90% market share in the desktop OS market, then the fine will be in the same ballpark as their profit on desktop OS sale in Europe. There is nothing arbitrary about this. And while fines may be large, they are just a drop in the bucket for the EU (just like in the US).

The whole idea that this is a way of targeting US companies is laughable. Every year there are loads of fines being imposed on EU companies for anti-competitive behavior that the US public hears nothing about. When Microsoft, Intel, etc. decides to conduct business within the EU, then they are subject to the same rules. And given that the EU is the largest market in the world, I expect they will decide to stay and follow the rules.

Lastly, while it is true that certain EU states have excessive debt, the EU public is around 80% GDP while the US debt is at +100% GDP. The economic problems in the EU are mostly centered on a few countries (Greece, Italy, Portugal, Spain, Ireland) while the rest are pretty okay (especially when compared to the US). It would have been pretty easy to save Greece, but the signal it would have sent to other countries would have been disastrous. Thus, Greece will suffer (because they have behaved irresponsible) so that Italy, Spain, etc. knows that they have to make drastic changes to ensure that they do not go the same way.




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