Microsoft's Antitrust Control Problem

Yesterday's US case status report is good news for Microsoft--and maybe a relief, with competitor complaints stirring up potential trouble for Windows Vista.

The joint filing explains that Microsoft and the government-mandated technical committee, or TC, "have increased their cooperation in several ways to help ensure that middleware ISVs achieve 'Vista-readiness' prior to the shipment of Windows Vista." The TC also has released a Windows XP and Windows Vista registry tool for developer download.

Aside from issues pertaining to protocol licensing, cooperation defines Microsoft's recent relationship with US trustbusters. The cooperation works for Microsoft. Of 25 complaints made since May, all "were non-substantive," according to yesterday's court filing.

By contrast, Microsoft and the European Union's Competition Commission have engaged in a very public spat, with, in June, the software giant slapped with a second fine. Last week, the European Commission chastised Microsoft over tomorrow's scheduled legal filing. The European Union also has shown more responsiveness to competitor complaints, which led Microsoft to make changes to Windows Vista last month.

Microsoft can argue that competitors are unfairly pressing trustbusters for changes not attainable in the marketplace. The tactics may be unfair, but what's fair about business? Competition is rough play, and Microsoft has been too many times in the penalty box. Referees are more closely watching Microsoft than other players. Whether or not Microsoft likes it, the rules apply differently because of the company's monopoly position. The difference: US antitrust overseers perceive Microsoft as playing by the rules, while in Europe Microsoft is charged with foul play.

Reasons for Microsoft's troubles in Europe could be many: US sentiments, internal politics, local antitrust laws, local economics, competitor complaints or Microsoft's unresponsiveness (whether real or perceived)--or any combination of them. I see another, which is perhaps fundamental to the whole problem: Control, whether Microsoft or the European Commission has it.

Governments expect companies branded guilty of something to be conciliatory, to be repentant. Microsoft is neither, in either government antitrust case. In both cases, Microsoft has sought to negotiate on its terms. In the US, the tactic eventually led to a settlement that Microsoft could accept, even if it perceived some terms to be unacceptable. In Europe, that tactic has not only failed, it has antagonized trustbusters there.

Setting terms is core to Microsoft's corporate culture. Other companies generally partner with Microsoft, rather than the other way around--at least with respect to acceptable terms. The approach is good business for Microsoft, such as yesterday's Office 2007 UI licensing announcement. What's good for business isn't the best tactic for responding to a government entity like the European Commission.

Ceding control can be as difficult for companies as individuals. For anyone that follows Fox series "House," a control issue has unfolded over the past few episodes. Dr. Gregory House totally ticked off a cop, who is seeking some revenge. House could have solved the problem with an apology, which he refused to give. Now, even as the cop targets House's friend and colleagues, the doctor refuses to repent, to cede control.

If the EU were a parent and Microsoft a child, the problem would be no more complicated than following directions. For example, Microsoft has received instructions to release protocol information, but took a different approach: allowing outsiders to view the Windows Server source code. Parent EU told child Microsoft to to clean his room and take out the trash. The child chose to instead clean the living room and bathroom and to wash the dishes. Child Microsoft contends that he has done more than the parent asked. But the parent sees the child as failing to follow instructions, and he is further punished.

I've heard some folks inside Microsoft describe the EU case as the "European drama." The term expresses frustration in the Microsoft camp about dealings with European regulators. I don't fault Microsoft for trying to reach some amenable end in the EU. But to get there, Microsoft may have to give up more control.

Tomorrow's EU filing may reveal how much Microsoft is willing to cede, or concede, to end the trauma of the European drama. While the filing pertains to protocol licensing, Windows Vista is party, too. Microsoft could use some European goodwill right now to get Windows Vista above competitor complaints on the continent.