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Antitrust policy : which competition is one talking about ?

par Xavier Méra
mardi 5 septembre 2006.

Article published exclusively on the Institut économique Molinari’s website.

A new threat of complaint for dominant position abuse hovers over Microsoft. This time, it is the Adobe company which challenges Bill Gate’s firm. As a spokesman for Adobe said, "Microsoft is in a monopoly position, and we are always attentive to the possibility that it could use it." This new situation was foreseeable.

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A new threat of complaint for dominant position abuse hovers over Microsoft. This time, it is the Adobe company which challenges Bill Gate’s firm. As a spokesman for Adobe said, "Microsoft is in a monopoly position, and we are always attentive to the possibility that it could use it." This new situation was foreseeable. The Microsoft lawsuit opened a Pandora’s box. Any competitor is virtually invited to engulf itself in the breach. It is a parody of competition policy that is played out in Brussels, to the detriment of consumers’ interests.

Following tough negotiations about a possible integration function to “record in PDF" in the future office package of Microsoft, Office 2007, as in the next version of the operating system, Windows Vista, the two firms did not come to any agreement. Microsoft has in vain proposed as an alternative solution the integration of only one free plug-in to download the application, Adobe claims not only one unbundling but a paying plug-in, in total opposition with the practices which this firm maintains with other software manufacturers. This recording function is indeed already integrated in many products competing with Microsoft Office, in accordance with the professed aim of Adobe to propose an open standard.

One could have stopped there, as often happens in the business world. An attempt at co-operation fails and each carries on in his own independent way. But in this case, we hear about a threat of attacking Microsoft through the courts. Adobe could hardly carry a complaint about a simple refusal to yield to its conditions on the part of Microsoft. What is happening about it then ? Microsoft did not only intend to integrate a PDF recording function but also in its own standard, the "XPS". Adobe moreover asked Microsoft to withdraw this function, as well as not to integrate it into the future Vista.

Thus, it is not so much the integration of PDF which poses the problem but that of the XPS competitor format. By refusing to make its PDF tool available, Adobe would expose Microsoft to a problematic situation with respect to the European Commission. The integration of the XPS recording function without the PDF option would open up the possibility of sanctions, as was the case for the integration of Windows Media Player. Microsoft could then be shown to benefit from the dominant position of its operating system by pushing forward its XPS format artificially, calling into question the success of the PDF standard. We thus take issue with a particular kind of negotiation. By threatening Microsoft with prosecution, Adobe could protect its PDF standard from competition.

The Redmond giant having probably anticipated this risk, has already proposed to subject the downloading of the PDF and XPS tools in Office 2007 to the same conditions and to propose two versions of Vista, with and without the integrated XPS function. In other words, it accepted in advance for Vista what the Commission forced it to do with Media Player.

All this shows that "competition" policy carried out in Brussels is in the process of destroying any authentic competition in Europe. In an open market, producers must compete to satisfy consumers. This is what determines their success or their failure. The "dominant position" of a company does not skew competition in such a context. Provided that it does not result from, or is preserved by special privileges, it is the consequence of a consumer plebiscite. Nothing astonishing with that. When consumers consider that a product is all the more interesting when its use is widespread, their "votes" tend to concentrate on some major actors.

An authentic competition exists when no legal barrier comes to prevent the entry of new competitors. In this context, the alleged barriers due to the "dominant position" of a standard product are as fragile as consumers want them to be. If not, how does one explain the passage from vinyl to CD or the diminishing success of VHS ?

In spite of the statements of principle announced by the European Commission, its allergy to "dominant positions" as such excludes consumers’ interest from the finality of competition policy. It follows on the contrary an anti-competition policy since the position of firms, their business models and their products, are judged independently of services provided to consumers. Thus another competition, consisting of obtaining the favours of the regulator, replaces the competition between producers to the service of the consumers. .

Xavier Méra, Institut économique Molinari




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