EU Ruling: A Reporter's Notebook
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The seeming finality of yesterday's European appellate court ruling reminds me of another day: Nov. 5, 1999. |
That afternoon, U.S. District Judge Thomas Penfield Jackson issued his stinging "findings of fact," where he branded Microsoft a dangerous monopoly. Until Jackson's findings, no major court had used the "M" word to describe Microsoft. More importantly, his findings were unexpected, like yesterday's ruling in Europe.
During the trial that preceded the findings, Jackson made clear his displeasure with Microsoft's courtroom behavior. But courtroom exchanges aren't often reflective of what a judge may decide, and the severity of Jackson's findings far exceeded any thoughts revealed during the trial.
Findings of fact are the foundation for everything that follows in an antitrust case. They're synonymous to the less formal process used by juries in criminal or civil proceedings to determine what they believe to be true based on the evidence. The process that followed, Jackson's April 2000 "conclusions of law" and June 2000 order to break up Microsoft into two companies, could be discerned from the findings of fact. The findings shocked Microsoft legal strategists more than even the breakup order.
See eWEEK slideshow: "EU Antitrust: A Case in History"
The mood I observed yesterday from Microsoft lawyers and reaction by the news media are reminiscent of Nov. 5, 1999. No one really knew what to expect. Court filings or the April 2006 hearing before the Court of First Instance didn't foreshadow how harsh the ruling would be for Microsoft. Like Jackson's findings of fact, there is a finality to the Court of First Instance ruling. For Microsoft's business, both court documents signaled dark days of strict government oversight ahead.
But here, like a Seattle sunny day bursting through the rain, findings of fact foreboding passed:
- An appeals court sent part of the U.S. case back to the lower court.
- Jackson was removed as Microsoft judge for speaking to the media behind closed doors.
- The 2000 elections brought in a new administration that later chose not to pursue a breakup.
- Microsoft's new judge demanded settlement, following the devastating Sept. 11, 2001, terrorist attacks.
Jackson's findings of fact still stand, but their dark impact doesn't.
Microsoft is a tenacious competitor, and General Counsel Brad Smith is a shrewd negotiator. Dark as yesterday's ruling may seem for Microsoft, the company has plenty of options—many of them not legal ones. Microsoft has good reasons to pursue them.
The issues around interoperability and protocol licensing pierce the core of intellectual property rights and trade secret protection. Following Jackson's ruling, Microsoft made the hollow proclamation that its fight would be for everyone—that government oversight of Microsoft would lead to regulation of the entire software industry. Nowhere did Jackson's findings of fact or conclusions of law grant the U.S. government such authority. Microsoft's rally was for its own business benefit.
The situation in Europe is different. The Court of First Instance ruling gives Europe's Competition Commission a club with which to beat on other successful companies. The European Commission's recent record, approach to managing competition and views on IP rights indicate the will to use that club. If Microsoft rallies the flag for all technology companies, its cry should be heeded this time.
Microsoft must now make tough choices about how it will do business in Europe. One option—as unthinkable as it may seem—is to stop selling certain products on the continent. If the European Commission is really looking out for the best interest of consumers, then it will have to heed the angry cries of small-and-medium businesses, enterprises, government agencies, retailers, resellers and system integrators, among others.
See eWEEK slideshow: "Microsoft's Loss Helps Google. Or Does It?"
Without question, Microsoft is a monopoly, and one that aggressively competes. Some tactics have rightly been labeled as anticompetitive. But like Microsoft or not, its products touch most every person in Europe. There is massive economy built around Microsoft products. That is where Microsoft's real power lies, and where it perhaps is most threatening to European regulators.
Microsoft is a stupid company, too. Microsoft should never have so antagonized the European Commission with Windows XP "Reduced Media Edition" or its protocol licensing program. Maybe following the March 2004 adverse ruling in Europe, Microsoft legal strategists used as a model what occurred after Jackson issued his findings of fact. But from the Court of First Instance's December 2004 ruling that the antitrust sanctions would stand during appeal, Microsoft legal strategists should have known they were in for a tougher fight on the continent.
Microsoft's stupidity is a burden to be shared with companies like Apple, Intel and Qualcomm, which are under investigation by the European Commission. The issues are success (meaning market share), IP rights and interoperability. How the European Commission handles Microsoft in these three areas will impact other technology companies operating on the continent.
Will managed monopolies, whether real or perceived, bring better competition to fragmented Europe? Yes, when pigs can fly.
Related Posts:
- The European Drama Unfolds, Microsoft Watch, Sept. 17, 2007
- Microsoft Employees React to EU Appeals Decision, Microsoft Watch, Sept. 17, 2007
- Microsoft's Stunning Court Defeat, Microsoft Watch, Sept. 17, 2007
- Microsoft's Antitrust Cases Stand in Judgment, Microsoft Watch, Sept. 10, 2007
- Did Microsoft's Consent Decree Benefit You?, Microsoft Watch, Aug. 31, 2007
- Search This, Google!, Microsoft Watch, June 26, 2007
- Microsoft Will Modify Vista Search, Microsoft Watch, June 20, 2007
- And There Was One, Microsoft Watch, March 8, 2007
- Microsoft Competitors' 'Wow' Moment, Microsoft Watch, Jan. 26, 2007
- Microsoft Resubmits Technical Documents to the EU, Microsoft Watch, Nov. 23, 2006
- Microsoft's Antitrust Control Problem, Microsoft Watch, Nov. 22, 2006
- Who You Gonna Call? Trustbusters!, Nov. 17, 2006
- Interoperability: Is Microsoft All Talk?, Microsoft Watch, Nov. 15, 2006
Comments (17)
"Without question Microsoft is a monopoly"
Look up the meaning of the word and stop making a fool of yourself:
"Exclusive control by one group of the means of producing or selling a commodity or service".
MSFT has a very dominant market position. It is not a monopoly as per the definition in that it does not have exclusive control.
"Microsoft is a stupid company, too. Microsoft should never have so antagonized the European Commission with Windows XP "Reduced Media Edition" or its protocol licensing program."
What a joke. The EUC from day one set the tone that this was going to be antagonistic, leaking info, setting ridiculous deadlines while taking MONTHS to respond in reverse. In light of that, MSFT picked the only strategy that made legal sense - especially in light of the dubious nature of the charges - play for time and hope the Court of First Instance overturned it as they had others in the past. That that didn't happen, doesn't suggest that MSFT was stupid. The EUC wasn't going to be their friend anyway they played it.
Posted by Paul | September 18, 2007 11:12 AM
Just to make sure i understand - Microsoft hypothetically pulls some products out of Europe and the economy "built around Microsoft products" will suffer?
I thought that that economy was built around a business requirement for certain categories of software - no matter the supplier and if anything is churned on by any large number of changes of IT infrastructure. (are we centralising or decentralising our IT right now...? i've lost track.)
I agree it would hurt businesses because they'd need to change provider for their next software purchase to someone else and as such also adjust their IT infrastructure; but when there's a gaping hole like that, there'll be a raft of players peddling their wares to fill it.
Also let's not forget that no-one's going to walk around uninstalling software from every pc in europe.
Posted by Eric | September 18, 2007 11:22 AM
Paul, "monopoly" also means: a commodity controlled by one party.
It does not imply absolute control, or absolute ownership of all assets. It just means control. Micro$oft's market share is not so small as to not give it control over certain markets. The court found that Micro$oft was a monopoly. Whether you agree with it or not is of no consequence.
Micro$oft's monopoly is bad for the EU, and is bad the rest of the world. What can be done to break it up or minimize its effects are to be encouraged.
Posted by Maddog | September 18, 2007 11:38 AM
Maddog :
"It does not imply absolute control"
Actually, that's exactly what it means. Look up "exclusive".
"Micro$oft's monopoly is bad for the EU, and is bad the rest of the world."
Opinion, provided by someone who spells Microsoft M$. Nuf said.
Posted by Paul | September 18, 2007 1:04 PM
mo-nop-o-ly /məˈnɒpəli/
1. exclusive control of a commodity or service in a particular market, or a control that makes possible the manipulation of prices.
Posted by Dictionary | September 18, 2007 1:33 PM
"One option - as unthinkable as it may seem - is to stop selling certain products on the continent."
That's not going to happen. Europe, followed by Asia, is the largest market for new PCs. US has dropped to third. See:
http://www.gartner.com/it/page.jsp?id=503816
If MSFT refuses to sell certain products in Europe, it guarantees its rivals a significant market share. Many people buy a product, say MS Office, because it is compatible with what the majority is using. If MSFT looses enough market share, it may be enough to tip the balance and cause a "sea change" in the market.
Posted by Karl | September 18, 2007 1:45 PM
Vertical Computer Systems Inc (BB: VCSY)
By: yo-eleven
18 Sep 2007, 01:38 PM EDT
Msg. 197788 of 197788
I believe MSFT was involved in the campaign to bring VCSY down. Whether overtly or covertly, MSFT would have had an overwhelming motive and imperative to see VCSY fail from 2000 to 2004. The effort would not have involved direct action by MSFT but would allow them to move forward in their XML developments confident VCSY would not be around by the time the technology development matured.
The most obvious elements of a campaign to bring a small company down are also easily seen in the public eye.
1. One of the tools a campaign can use to accomplish a takedown of a smaller company is shorting. I do not say MSFT did the shorting but a relationship with a commodities broker would have accomplished the effort covertly.
2. One of the tools a campaign can use to accomplish a takedown of a smaller company is adverse publicity. Since the smaller company is likely small cap the public discussion about the company would be limited and easily affected by operatives who would carry out the campaign. This would be especially effective carried out after the shorting campaign.
3. One of the tools a campaign can use to accomplish a takedown of a smaller company is government intervention. This would be an effort of last resort as this option would be the most easily blown method. One curious coincidental artifact of a timeline stratification is this:
November 30, 2004 (Tuesday)
The 6826744 patent was granted.
The very next day VCSY's listing was suspended as a part of a list of 26 companies delisted for delinquent reports.
December 1, 2004 (Wednesday)
From VCSY filing: "the Company was notified by the SEC of an administrative proceeding pursuant to the filing of an "Order Instituting Administrative Proceedings and Notice of Hearing Pursuant to Section 12(j) of the Securities Exchange Act of 1934" due to the delinquency of filing of the Form 10-KSB for the year ended 2003 and the Form 10-QSB for the first three quarters of 2004. The Company filed its Form-KSB for the year ended 2003 on January 19, 2005."
---
As we all know VCSY was damaged by various efforts but they survived and maintained control of the intellectual properties that Microsoft and many other technology actors would have wanted. The aftermath of a failed campaign would also be fairly obvious although perhaps difficult to prove without court ordered discovery.
1.1 One could expect the broker and records to disappear should the effort was blown.
2.1 One could expect the writers and various written statements that were most incriminating would disappear.
3.1 One would expect the government action would be short-lived.
VCSY was cleared (in fact, I think the record shows VCSY was the ONLY company to recover from that list) by the SEC and relisted December 6, 2005 (Monday). Some curious events happened that same day. 3.2 Robert Tinley was fired as CEO of CDC/Ross systems. Shortly after, a notice was given that resulted in the shutting down of a shared UDDI site (an operational construct using XML for resource discovery) by Microsoft IBM & SAP. The announcement was made December 16, 2005. The actual shutdown was made January 12, 2006 - 4 days short of the customary 30 day notice/implement timeframe. This places any legal notice within the December 10, 2005 (Friday) timeframe which would result from an original issue within the December 6 period.
Microsoft's SOA efforts appeared crippled by this shutdown while IBM and SAP continued their developments seemingly unhindered using other methods. At least one competitor made adjustments by acquiring UDDI capability, but, Microsoft did not move.
There actually are a number of other options and are easily correlated with other dates and events but the above three fashion a core project that could be carried out by a small number of operatives.
Posted by I-Man | September 18, 2007 1:53 PM
Again, being a monopoly is not illegal either in the US or in Europe. Using monopolistic power is illegal. Monopoly is not only about exlusiveness, but also about having enough control to influence price and the market in general etc. In that sense Microsoft is a monopoly. But it's not only Microsoft in the tech industry...
The case that Microsoft has made all along is not really argue on wether it is a monopoly. What Microsoft says is that the Softare industry is changing so fast, that noone can really say with much certaintity what its status is going to be tommorow.So, it has to be allowed to improve its product line and not be constrained.
Other that than I have to agree with Paul that the EU commision is biased towards Microsoft and I know this from personal experience in working with the EU Comission. The verdict was going to be negative for Microsoft, for political reasons as well, no matter what Microsoft did.
Posted by evan | September 18, 2007 2:06 PM
Quoting Joe Wilcox;
"Microsoft must now make tough choices about how it will do business in Europe. One option—as unthinkable as it may seem—is to stop selling certain products on the continent. If the European Commission is really looking out for the best interest of consumers, then it will have to heed the angry cries of small-and-medium businesses, enterprises, government agencies, retailers, resellers and system integrators, among others."
----------------------------------------------------
And what do you suppose would happen to Microsoft if it did stop selling software in Europe? That is MS biggest market by far. The stock would tank, just for starters.
Linux which already has a foothold in many EU countries would greatly increase in market share. And people would just start pirating Windows there, perhaps even with the blessing of the EU. It could even become legal to hack it at that point. Think about it, Windows without all the spyware and back doors in it, like the recent hidden updates.
Well, its not going happen, people. MS has to sell to the EU, or go to the dustbin of history. Good place for them anyway. There will be a whole lot of worthless MS employees bloggers out of work though.
Posted by chips | September 18, 2007 2:50 PM
"Good place for them anyway. There will be a whole lot of worthless MS employees bloggers out of work though."
Chips, did they fire you or just not even bother interviewing you?
Posted by Pual | September 18, 2007 3:12 PM
If the European Commission has such an issue with Microsoft, I'd be surprised if they don't have a field day with Apple, the king of proprietary stuff. And I think they are a way worse offender than Microsoft but they fly under the radar because their market share is so much smaller.
Posted by Apple$oft | September 18, 2007 3:16 PM
I would further state that the effort and money, that MS is expending on the ISO standards, may end up being a complete waste for MS, even should they get eventual certification.
Simply because the governments of the world want this interoperability of document formats, between all systems and word processors, as they, the governments of the world, have trouble with this problem. At some point, look for the EU to mandate that for MS as well.
Posted by chips | September 18, 2007 3:20 PM
"And what do you suppose would happen to Microsoft if it did stop selling software in Europe? That is MS biggest market by far."
Actually Chips, the US is. If you're going to devote your life to bashing the company, at least get your facts straight.
Posted by paul | September 18, 2007 6:26 PM
got a link for that paul, prove it
Posted by chips | September 18, 2007 7:42 PM
Paul,
I could be wrong about Europe being MS largest custormer, but I do believe I read that somewhere, so if you have the link, I would be interested in reading it.
Posted by chips | September 18, 2007 8:15 PM
Joe,
Good article.
This will be a big issue for Google eventually.
By the governments criteria, Google has a majority market share (>70-80%) and thus a monopoly. If there is a product sold on the market (say speech search), and google wants to add this to their current product/service (the search engine service on google.com) then the exact same rules would apply. In other words, Google will not be able to add new products/services to their current google.com offering if the service is already offered by a 3rd party.
Dark times ahead.
Posted by David Taylor | September 19, 2007 4:49 AM
How can anyone say that "There's no question that Microsoft is a monopoly" (actually, Windows was ruled such, not the company itself), when HP, Dell, and Lenovo are selling Linux PCs? Let's deal with the reality of today. There is no monopoly today.
But that isn't the point, really. In the EU, monopoly isn't the issue, merely "dominance" is. Dominant companies are "bad" by definition according to EU law. And Europe wonders why it's fallen so far behind the US and Japan, after ruling the world up until WWII.
Posted by Pepe | September 21, 2007 4:24 AM