Sales of Vista, Microsoft's new operating system, appear to be
exceeding forecasts. Meanwhile, Brussels is ramping up its test of
strength with the software giant.
Under the pretext of protecting competition, and following record fines
of several hundred million euros and a requirement to disclose strategic
information to its competitors, the European Commission is moving toward
controls on the prices of this information. Although some competitors
may gain, in reality these measures all go against the principle of free
competition and against consumers.
Despite the additional time granted to Microsoft (the company now has
until 23 April to respond to Brussels's Statement of Objections), the
commission's readiness to influence the prices of interoperability
interfaces embodies a number of perverse direct effects. |
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First of all, in a framework of free competition, it is consumers who
end up deciding if a product or service is sufficiently innovative by
choosing whether or not to buy it. In this particular instance,
commission technocrats have taken it on themselves to decide that the
information provided by Microsoft "does not contain significant
innovations." Letting the commission issue decrees in this matter does
nothing to promote free competition.
Furthermore, with free competition relying inextricably on respect for
the property rights of parties in the market and on free negotiation of
prices, the commission is clearly on the attack here as well. After
fabricating an artificial "market" in information on the
interoperability of the Windows operating system, something that might
certainly have remained a commercial secret, the commission is being
drawn inescapably into seeking to control their prices as well.
But the real danger comes, indirectly, from an unrealistic vision of
competition, based on market share, that pushed the commission into
condemning Microsoft initially for "abuse of dominant position" in
operating systems. It also accuses the company of using this "position"
to attack other niches in the software market and hampering competition.
From an economic standpoint, the intensity of competition should not be
measured by market share, as the commission has done. The fact that a
company such as Microsoft equips the great majority of PCs around the
world does not mean competition is somehow threatened or diminished.
Unless competitive entry is blocked by law, competition may come not
only from existing operating systems but also from potential competitors
joining the fray, drawn by the opportunity to serve consumers better and
thereby make a profit.
Even if the market shares of competing operating systems are very low
today, nothing stops consumers who find Windows unsatisfactory from
turning to competing products. It is certainly feasible to opt for
Apple's operating system by buying one of its computers. It is also
possible to put together one's own computer, or have an independent
professional do so, and equip it free of charge with the Linux operating
system. Companies such as Red Hat or SUSE specialize in the sale of
complete Linux-based packages, with extras such as technical assistance,
enabling computers owned by businesses and individuals alike to run on
Linux.
If there were truly a demand for options other than the Microsoft
operating system, companies would not hesitate to specialize in meeting
this demand. On the contrary, if Microsoft retains a "dominant
position," it is because it offers today's best alternative in consumers'
eyes.
But competition can also come from new players. Although merely a
potential constraint, this is just as real for Microsoft as the
existence of direct competitors. For instance, what would prevent Intel,
the number one maker of microprocessors, from competing against
Microsoft in operating systems, just as Microsoft could one day decide
to build its own computer from scratch – including a processor in
competition with Intel – and to be the only firm selling machines
running on Windows?
Contrary to what one may be inclined to think initially, this sort of
competition may already be starting to emerge. For example, Red Hat and
Intel just announced that they are linking up to help the latter's
reseller partners "with rapid entry into the expanding Linux marketplace
with Red Hat's comprehensive portfolio of solutions and new ways to
provide their customers with more value".
In this context, the antitrust authorities in Brussels – with their
tendency to punish companies overwhelmingly favoured by consumers – may
paradoxically stifle competition. Their policy can only induce Intel to
hold back on moves to advance projects that challenge Microsoft's "quasi-monopoly,"
should the opportunity arise to provide greater consumer satisfaction.
Does the commission not already have Intel in its sights because of
another presumed "abuse of dominant position" with its 80% world market
share in processors?
The commission's relentless attitude toward Microsoft may artificially
protect some current competitors, but not competition as such. When
there are no legal barriers to entry, consumers can stand up on their
own and choose the companies that best meet their needs. Microsoft is
constantly subjected to the market test and must continuously win
consumer confidence. Free competition needs to be protected, not against
Microsoft but rather against Brussels.
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