Why Microsoft's New EU Fine is Just Fine

News that Microsoft is to be hit with yet another fine from the European Union has naturally attracted plenty of attention, but it has also raised the old questions of whether such interventions by governments are justified or even do any good.

Some seem to believe that the market, inherently red in tooth and claw, should be allowed to sort itself out without any kind of government intervention. But as a convicted monopolist, Microsoft has already been found to have abused its dominant position, so the idea that it should be allowed merrily to do the same wherever else it fancies just because it can, with whatever collateral damage that may cause to open source projects, hardly seems in the public interest. By all means let it compete – but on a level playing field.

The second question – whether such fines have any effect – is more complex. Some have pointed out that €899 million, although a huge sum for anyone else, is pretty small change for Microsoft. It might therefore regard the prospect of fines as simply another cost of doing business the Microsoft way, where the benefits of failing to comply quickly with court rulings outweigh the risk of a little wrist-slapping. I think that was probably true in the past, but the world has now changed rather radically in two ways, which together may be enough finally to make Microsoft think twice about taking this course in the future.

The first factor is Microsoft's bold move to take over Yahoo. Leaving aside the fact that huge mergers rarely deliver – just think of the AOL/Time-Warner fiasco, which essentially destroyed AOL as a major Internet player – there is the inconvenient fact that Yahoo is almost as dependent on free software as Google. Microsoft, of course, is still hugely sceptical about open source, whatever lip service it may have paid recently to the idea of openness and interoperability.

As a result, a combined Microsoft-Yahoo operation will be a mixture of digital oil and water: the only question is whether Microsoft will try to change enough to manage Yahoo's fundamentally different approach to infrastructure, or whether it will engage in an insane and possibly suicidal attempt to rip the heart out the heart of Yahoo's engineering and replace it as a matter of policy with its own technology. Whichever option it chooses, bringing Yahoo on board is going to cost a huge amount in terms of money and – perhaps even more critically – management time.

That would be bad enough, but on top of that, Microsoft will, for the first time, be taking on a huge amount of debt to help pay for Yahoo if the acquisition goes through. So as well as a hugely-stressed and possibly warring management structure, Microsoft will also have to cope with interest payments on its debt, which will need to be funded out of earnings. In addition, those earnings have to rise pretty steeply to justify the whole Yahoo adventure, or shareholders will start to express their dissatisfaction.

Against this background, the last thing Microsoft needs is fines. Remember that we are not in fact talking about “just” €899 million here: as the EU commissioner Neelie Kroes noted during the press conference announcing the latest fine, the cumulative amount that Microsoft must pay the EU is €1.6767 billion. The fact of the matter is that if the Yahoo deal goes through, Microsoft will be strapped for cash, and paying out over one and half billion euros for “nothing” will hurt.

This means that the threat of further fines is not one that the company can contemplate lightly. Moreover, that threat is very real – and here we come to the second major shift that I referred to above. From being something of a joke, perceived as a bureaucracy in search of a role, the European Union has emerged as the dominant regulatory body for the world of computing (and probably beyond).

After a couple of pretty weak results – for example, requiring Microsoft to produce a version of Windows without Windows Media Player, which of course, nobody wanted – the EU hit its stride when it forced Microsoft to open up its network interoperability protocols. Proof of the EU's power in this area was provided by Microsoft itself last week, when it made its various commitments on openness. It concluded:

The interoperability principles and actions announced today reflect the changed legal landscape for Microsoft and the IT industry. They are an important step forward for the company in its ongoing efforts to fulfill the responsibilities and obligations outlined in the September 2007 judgment of the European Court of First Instance (CFI).

“As we said immediately after the CFI decision last September, Microsoft is committed to taking all necessary steps to ensure we are in full compliance with European law,” said Brad Smith, Microsoft general counsel. “Through the initiatives we are announcing, we are taking responsibility for implementing the principles in the interoperability portion of the CFI decision across all of Microsoft’s high-volume products. We will take additional steps in the coming weeks to address the remaining portion of the CFI decision, and we are committed to providing full information to the European Commission so it can evaluate all of these steps.”

Moreover, it even goes beyond those requirements, applying the EU's demands to other major products. Obviously, it is not doing that out of the goodness of its heart: as Andy Updegrove has noted, this looks like a fairly blatant attempt to sway those taking part at the ISO meeting currently taking place in Geneva.

But the critical thing is that Microsoft frames its actions in terms of fulfilling its “responsibilities and obligations” to the EU, and that it explicitly calls this a “changed legal landscape.” That is, it knows now that all its actions will be looked at with a very sceptical eye by an EU that has not only hit it for nearly €1.7 billion, but which has made it quite plain that it will do it again – and again and again, if necessary.

What makes this particularly important is that the EU has already initiated two new formal antitrust investigations “in order to verify whether Microsoft is complying with the principles established by the Court”:

One of these investigations focuses on the alleged illegal refusal by Microsoft to disclose sufficient interoperability information across a broad range of products, including information related to its Office suite, a number of its server products, and also in relation to the so called .NET Framework and on the question whether Microsoft's new file format Office Open XML, as implemented in Office, is sufficiently interoperable with competitors' products.

The second investigation concerns allegations of tying of separate software products, including Internet Explorer, to the Windows PC operating system.

And that's not all. On the subject of Office suites, the Danish Unix User Group has recently filed a formal complaint with the EU Commission:

The Danish state represented by ITST has made ECMA 376 [OOXML] mandatory from the 1st of January 2008 for cartain procurements in the Danish state, thus making the procurement unacceptably favouring a specific company and their product, and setting their competitors in the field of office software at a competitive disadvantage.

It is noted that ECMA 376 is not an international standard. Furthermore it is noted that ECMA 376 contains a number of specifications that are undocumented about specific information on implementation of MS Office. And it is noted that a report procured by ITST itself found that ECMA 376 cannot be said to be entirely open, which has been a condition of the Danish Parliament (Folketinget) for accepting the regulations.

It is also noted that the regulation does not contribute to improving the production or distribution of goods or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit, as other solutions for office software can be as cheap or even cheaper, and there thus is no benefit for consumers, rather the contrary. The regulation may on the other hand lead to keeping the de facto near monopoly, that Microsoft Office has in the Danish state.

Whatever happens with OOXML and the Danish complaint, the key gain for openness has already been achieved. Unable to regard fines from the EU with indifference or even contempt, Microsoft will have to start really playing by the rules. Finally.

Glyn Moody writes about open source at opendotdotdot.

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there are no rules in business.

Valhalla's picture

Business is no different from warfare for those who have worked in it- not external from it.

Conquer or subjugate your rivals. Only delight in their demise.

Microsoft is only protecting its own turf with its money and privilege at its disposal. The EU ruling should cripple it some more.

Microsoft shafted the $100 computer for poorer countries as he wants the US to be the dominant computing global power. Not so no more with Red China and Expansionist Russia looking for non-US solutions.

The world is changing to fast for Microsoft anyway. Its share price says everything from its mighty glory in the 90's when it was the alpha wolf.

The longer the recession goes the more powerful Linux will become to developers and big business (especially stock market) had made the change long ago.

Micosoft did not update the XP/OS/2 core of its outdated Windows OS. Now its paying the price.

So be it.

One to watch:

Anonymous's picture

I just have a real problem with the basic idea

Mark Dean's picture

Rather than comment on any specifics of this article or the fines imposed, etc. I just want to add that I have a basic problem with any government reaching into a private company and attempting or succeeding in telling them how to run their business or how to handle their product. I'm not saying that there should be no regulations or no oversight. But it should be a very hard thing to do since it is treading on what I consider sacred grounds, that of an individual or group of individuals who form a corporation to be able do business with little or no interference from government.

There is a type of government that allows for basic private ownership but government control and that is called socialism and/or fascism.

As far as Microsoft goes, and I'm no fan nor am I an apologist for them, but no one is forced to use their products, OK? And no other group should know this than the group that would read and comment on this web site, one that is about Linux. I think that many have a hatred for Microsoft that transcends intellectual honesty and they forget that today it may be Microsoft that is being dealt with but tomorrow it may be they that is being sanctioned or restricted by the government or a company they actually like and what will those folks' attitude be then?

You can run your business without any Windows products, you can have a home PC without any Microsoft products so where is the monopoly? True, a game or other program you like may require Windows, but that is the choice of those companies that make those products. Should government step in and require them to port their products to Linux? After all, that is the real problem, not Windows, but it is the programs that keep many from going away from Windows and not Windows as an OS. I don't see anyone really clamoring for the EU or FTC stepping in and going after software companies, after all, if Microsoft is breaking the law with their "monopoly" then any company or individual who creates a Windows only product, is an accessory to that "crime". The same can be said of any computer manufacturers who make deals to pre-install Windows, they also are guilty of the crime, so let's start filing criminal complaints against them all.

It really is a sign of the times, people always running to the government to solve their problems along with an unhealthy case of wealth envy.

I do almost all the things I need to do using Linux and Unix, including running my consultant business. And I can buy a PC or server without an OS or even with Linux pre-installed, and have always been able to so, so this idea that Microsoft "forces" PC manufacturers to only sell Windows is, in most cases, just plain false. I choose to have a few Windows systems because I choose to play some games that I can't get to work in Linux and because there are a few Windows programs that I actually like better than the Open Source equivalent. But that's my choice. I am far too much a believer in liberty and freedom as well as capitalism to ever run crying to my representatives because Microsoft holds a substantial share of the OS market.

This is not about a company that is spewing out toxins or bumping into Alaska and dumping a bunch of oil as one poster mentioned, this is a software company that has been very shrewd in its dealings early on that put them as market leader. That will not always be the case. But regardless, let the market take care of this.

Monopoly, give me a break.

Nope

Phil Hughes's picture

You said "It really is a sign of the times, people always running to the government to solve their problems along with an unhealthy case of wealth envy."

I don't think so. Bill Gates is wealthy. Carlos Slim is wealthier. If I had wealth envy, it would be placed on them, not a company.

Now, Nicaragua has allowed one of Carlos Slim's companies to purchase Enitel, the company from which I buy DSL service. While not an absolute communications monopoly here, it is close—probably equal to Microsoft's marketshare in PC software. Both Carlos Slim and the company that owns Enitel are Mexican.

This puts the majority of the internet connectivity for an entire country in the hands of "something" that isn't even in the country. An upstream business decision that, for example, DSL wasn't profitable in Nicaragua so let's turn it off, could be made in Mexico and Nicaragua would all but vanish from the internet. Yes, the market would eventually provide alternatives but it would be at least a temporary disaster.

If instead of Enitel we had a Nicaraguan or group of Nicaraguans that owned our connectivity services, we (the residents of Nicaragua) would have someone to talk to. But, with artificial people (the corporations) in the chain, a decision could be made to kill Enitel and we would have no recourse. This is precisely why, if a government grants a charter to create an artificial person, that same government has a responsibility to the real people it serves to regulate that artificial person.

Phil Hughes

wealth envy is not just for individuals

Mark Dean's picture

A successful company is often looked upon as greedy and evil by the uninformed and uneducated. Wealth envy spills over into the company. It matters little who is the market leader, whomever that is, it will be reviled by many and the competitors will be clamoring for regulations and a "fair playing field".

I agree with you, in your scenario, a monoploy for telecommunications is a disaster and unacceptable situation. We (the consumers) caught a nice break here in Georgia when, in order to get the AT&T and Bellsouth merger approved (again, don't like it, made my complaint known) they agreed to unbundle the POTS service with DSL. Now, for the first time, we don't have to be saddled with having a dial tone just to get DSL. That's important to me since I have both DSL and Cable modem (for redundancy and business) but I want all my phones to be VOIP.

If the government is going to allow a monopoly then I agree with regulations on what they can charge what they can do etc. That is part of the price the company pays for the 'exclusive rights' to sell whatever.

Too many words, ... Too little logic.

Anonymous's picture

1--->" but no one is forced to use their products, OK? "

Not OK.

Your entire wordy perspective comes from the assumption that everybody in the world that uses computers on a consumer level has your skill set.

You are wrong.

Microsoft has abused the system, rigged the system, and manipulated hardware vendors, all in the effort to take advantage of non computer savy consumers.

File formats, hardware drivers, software compatibility and availability are Microsoft's real tools.

2--->" The same can be said of any computer manufacturers who make deals to pre-install Windows, they also are guilty of the crime, so let's start filing criminal complaints against them all."

Get real. You really think that there is no Microsoft leverage applied to
computer manufacturers?

3--->" And I can buy a PC or server without an OS or even with Linux pre-installed, and have always been able to so, so "

"So, So" is your logic here again. The weak and easily manipulated consumer is Microsoft's prime target and bread and butter. Your logic that since you can do it everybody can, simply fails.

4---> " I am far too much a believer in liberty and freedom "

If this was true, you would have had the balls to include the subject of OOXML. Has your head been in the sand or is it in a warmer place?

You may want to Google "OOXML ISO investigation" when you come up or out for air.

See: Microsoft under third EU investigation, this time for OOXML

By Emil Protalinski | Published: February 10, 2008 - 11:06AM CT

Buyer beware my friend

Mark Dean's picture

Because I am a believer in liberty and freedom I somehow don't have "the balls" to include some specific specifications? The OOXML debacle is a standards debate like so many. And it's not like there are no big companies opposing Microsoft, IBM is pretty big and they're pushing hard for ODF. So how do my balls look to you? Or are you a "switch-hitter", not that there is anything wrong with that...

Why are you so emotional about Microsoft? The weak and easily manipulated deserve what they get. That's the way it is supposed to work in a free society. Freedom means responsibility. It means reading the fine print and eating a bad deal if you don't.

Applying leverage is not a bad thing. Just about everyone does it when it comes to generating a business deal. It's called negotiations. In your world, apparently, negotiations are the government telling a company what they can and can't do, how they can and can't market their products.

I sell what my costomers want and that is how it should be. I don't rant and rave about how evil they are like so many folks. And I don't tell them how stupid they are if they choose something I don't like.

As far as my head in the sand, I know Microsoft has aggressive and perhaps unethical practices, but unethical is not illegal. There are a ton of companies that are in direct competition with Microsoft and are turning nice profits. But that is lost on folks like you.

As far as OOXML goes, it all depends on what site you go to, whether the blogger, "reporter", or writer is pro-Open Source or pro-Windows, as to if it is a good thing or a bad thing. And there are no real agreement among analysts.

Google this and that, yeah, like the stuff on the Internet is even close to half-way being true anyways. It's mostly a bunch of blogs by want-to-be IT professionals, apparently like yourself.

God help us if you are an American and can vote...

Look, you PEVERTED MORON.

Anonymous's picture

1---> "is pretty big and they're pushing hard for ODF. So how do my balls look to you? Or are you a "switch-hitter", not that there is anything wrong with that..."

Your text provides a clear picture of how that twisted little "brain" of yours processes information.

The facts are clear.

2---> "The weak and easily manipulated deserve what they get. "

Your image gets clearer with each word.

3---> "sell what my costomers want and that is how it should be. I don't rant and rave about how evil they are like so many folks. And I don't tell them how stupid they are if they choose something I don't like."

So, you aspire to the worlds oldest profession.

Stop bragging about it.

A little to much.

Debra's picture

I think the fine was a little steep to be honest!!!

Microsoft vs EU

fria's picture

It's time for the US government to put pressure on the EU to stop these petty lawsuits against Microsoft. As dominant as Microsoft is, the advantages they gained were done so lawfully. The EU is holding them captive as a source of revenue to fund European companies, not necessarily open source. This is not fair competition, rather it is government subsidized. As users who appreciate open source and all the good things that come from it, it's fun and human nature to poke and ridicule the Goliaths of the world. But lets remember, there isn't much left that Americans can claim as being dominant in. The GMs and GEs that use to be examples of the best America had to offer are no longer what they use to be and have been replaced by Toyota and Samsung. Are we in such a hurry to knock down the few remaining American corporations left? What's worse, am I going to be forced to use Opera?

Microsoft deserves even bigger fines. They have been bad.

Anonymous's picture

Read:

http://www.grokdoc.net/index.php/Dirty_Tricks_history

As you can read from the above URL, the Microsoft dog stinks with the smell of it's monoploy tactics. It is time to bring this dog from the woods, put it properly into it's cage, and tame it so that it will exist without hurting society (meaning that the neighborhood can again exist peacefully).

Interoperation, and common use of computer sharing the same standards WAS the goal of computer BEFORE Micrsoft tainted it with tactics designed not to create good software, but to have MS be the only company creating software that could exist. It is time... the EU needs to even place bigger fines on Micrsoft, punishment is the only thing that they "might" finally understand. I would say that at this point, with the money that they have made by being "bad actors for years" that a 20 Billion dollar fine would not be enough.

What Microsoft has been doing "should" be criminal (bigger fine)

Anonymous's picture

Read:
http://www.grokdoc.net/index.php/Dirty_Tricks_history

As you can read from the above URL, the Microsoft dog stinks with the smell of it's monoploy tactics. It is time to bring this dog from the woods, put it properly into it's cage, and tame it so that it will exist without hurting society (meaning that the neighborhood can again exist peacefully).

Interoperation, and common use of computer sharing the same standards WAS the goal of computer BEFORE Micrsoft tainted it with tactics designed not to create good software, but to be the only company creating software that could exist. It is time... the EU needs to even place bigger fines on Micrsoft, punishment is the only thing that they "might" finally understand. I would say that at this point, with the money that they have made by being "bad actors for years" that a 20 Billion dollar fine would not be enough.

Your rant

Anonymous's picture

Read like typical MS Shill drivel. MS was convicted in the US plain and simple, read the findings of fact. I seriously doubt you are a user of FOSS. Propping up a thrice convicted predatory monopolist is not going to help the USA, get your head out of your McCarthy. Why couldn't MS compete without the sleazy illegal business practices? Now that they have been convicted multiple times why does evidence of continued probably illegal business practices continue to surface? Do they suck that much?(rhetorical question). Companies, and especially convicted monopolists, that suck that bad do not deserve protection.

Legal decisions

Mark Dean's picture

So, do you agree with *every* legal decision handed down by judges and juries? I sometimes think that they get it wrong. I sometimes think that even the Supreme Court gets it wrong.

Do I think that the decision labeling Microsoft as a monopoly was wrong? Yes. Here's why: A monopoly indicates exclusiveness, no other choice. Yet, I've been either buying or downloading non-Microsoft programs and operating environments for just about 30 years. So, today, if there are at least 4 other options on the x86 OS front alone, how is it a monopoly? Do they have a majority of the market? On the desktop, yes. But the funny thing, when I switched my main desktop to Linux in 2003 I also went to purchase a PC. I decided on a Dell Precision Workstation. Guess what? I was able to buy it pre-loaded with RHEL.

A real example of a monopoly and how it stifles competition is my local cable company. I can only have cable from one outfit. If I wanted to start my own cable company, I would not be allowed to do so as the county has an exclusive agreement with the cable carrier operating here. That's a monopoly. If you don't believe me, look the word up in a dictionary. It does not mean substantial or majority share, it means exclusively. Just like the game; you can only win the standard playing of the game if you have a, drum roll please, MONOPOLY, in other words ALL OF THE ASSETS on the board.

Yes, some of the US courts, did find them to be a monopoly. But they got it wrong. It was a politically motivated fiasco.

Let's look at another legal decision. The courts found that Novell held the Unix patents, not SCO. Now that works in favor of Linux. So, do you agree with that decision because it is the right one, because you agree with every decision and don't think for yourself, or because it favors the things you favor? I think you would be well suited to spending some time contemplating things and try to be intellectually honest.

One other thing, in 2004, the Supreme Court reversed, in part, the judgement of the lower court that held that Microsoft violated sections 1 and 2 of the Sherman Antitrust Act. So it's not as cut and dried as many posters to forums like to make it out to be.

breaking the rules was fun to do

Jose_X's picture

>> As much as I loathe Microsoft, I defend its freedom to compete "unfairly" for the same reason I defend a Nazi's right to spew venom -- because ultimately it is my own freedom I am defending in both cases. The expansion of government power to stifle dissent and rig markets is more dangerous to my liberty than Microsoft or the Nazi will ever ne.

EricRaymond,

You make a good point. Most things called "crimes" or "violations" or "breaking the rules" by government are relative and involve subjective calls. People should never allow their governments to collect taxes to make these calls on their behalf (even if people want to pay for that service -- a higher power should not allow it).

Nevermind the courts' "checks and balances"; they don't work either because they are also subjective and get funded through taxes.

Yours in hiding,
Osama Bin Laden

PS: Where I live the "private" sector handles these decisions on behalf of the almighty.

FAKE Terrorist Tatic (more MS sleazy behavior?)

Anonymous's picture

This is an obvious attempt to:

1. Scare bloggers on this blog and thus KILL this conversation.

2. Stifle FREE Speech of this timely discussion that is right on target.

* The comment should be signed:

Yours in hiding,
Monkey Boy !

PS: Ignore this comment.

Indirect taxation

Anonymous's picture

Fines against monopolies is an indirect form of taxation. Microsoft can recover the money paid for the fine in 10 months just by rising the average price of Windows and Office for only 10 euros. Through the method of the pre-installed OS or because of the lack of applications, the majority of the European customers have no way to avoid the payment.

A direct tax carries a significant political cost. A fine against a monopoly brings the same amount of money in the treasury and a political gain. The European Commission protects us.

Fines are a good and useful tool against companies which try to become monopolists, but they are not already. In that case the fine keeps the competition active. If there is no competition, the fine is useless.

Legislating the conformance with open standards can create opportunities for the competition. This is the only honest and fair option we have against a monopoly like Microsoft.

Anonymous ("Indirect

Jose_X's picture

Anonymous ("Indirect Taxation"),

You make many good points, but what does it mean to legislate without penalties? The EU should fine MS for breaking the rules, disallow MS to raise their prices henceforth (or something along this line), and put teeth behind government plans to eliminate all MS products from government offices as they reach end of life. This would be in force at least until some balance was reached in market share. Otherwise you are correct that the EU and MS could get into bed together to play good cop bad cop in order to tax the citizens to death (who are already being taxed till death).

Maybe next time, Microsoft just won't accept the rules of the game and stay out of the game.

Antitrust is incompatible with liberty

EricRaymond's picture

(Your comment-posting interface is horrible. You might get this twice.)

I doubt anyone is going to accuse *me* of a desire to make life too easy for Microsoft, so let me make the countercase. Yes, taking down the boys in Redmond should be left to the free market -- which, in this case, is us. That is to say, the Linux community and its corporate allies.

The overriding reason to reject "antitrust" is the same reason "hate speech" laws are deadly to a free society. They may seem like a good idea if you are narrowly focused on one egregious example, like Nazis publishing blood libels against Jews or Microsoft's tied contracts with OEMs and the attempt to ram OOXML through ISO. But the powers that such laws grant to governments are, in the longer term, incompatible with liberty.

Because...who decides what is "hate speech"? or "unfair competition"? There is no bright-line test in either case, and the boundaries are always interpreted politically. Which means that both hate-speech and antitrust laws always become the tools of entrenched power against upstarts and disruptors. The longest-running monopolies in U.S. history were created and popped up by government fiat; AT&T stands out as an example.

As much as I loathe Microsoft, I defend its freedom to compete "unfairly" for the same reason I defend a Nazi's right to spew venom -- because ultimately it is my own freedom I am defending in both cases. The expansion of government power to stifle dissent and rig markets is more dangerous to my liberty than Microsoft or the Nazi will ever ne.

Corporate Rights vs. People's Rights

Phil Hughes's picture

While it is conceivable that a natural person or group of natural persons working together could form a monopoly, I suggest that the issue has been created by a government allowing a new entity called a corporation to be created and allocated rights that were only intended for people.

Two examples come to mind: the Exxon-Valdez indicent and the Union Carbide Bopal incident. In both cases, the corporation was responsible for the consequences rather than the individuals that invested in the corporation. Now, we all know that one big benefit of incorporation is to isolate the stockholders from the legal "problems" of the corporation. But, isn't that exactly the problem?

It is in fact the responsibility of corporate management to do what is best for the stockholders. That includes making business decisions that indicate a better profit for stockholders—even if other "anti-social" factors are involved. Thus, safety becomes a best return on investment decision (including, of course, any image repair costs) rather than being socially responsible.

This is a lot easier to see in cases where a company is making a decision based on the cost of a human life (add car safety design desisions such as "flaming Pintos" to the list) than when you have a company such as Microsoft who is just trying to capture more marketshare. But, it all boils down to the same problem—a new entity is created with the rights of a human but not with the same responsibilities. You cannot, for example, put Microsoft in jail.

This doesn't mean corporations have to be eliminated in order to address this problem but what it does mean is that as it is the government that created this new entity that is competition for humans, it is the government's obligation to limit what a corporation can do. Now, a real libertarian would be for the elimination of corporations which is fine with me but you can't have it both ways—that is, allow the government to create something artificial and then say the government doesn't have a right to control it.

Phil Hughes

Over simplified

Mark Dean's picture

The problem is that a corporation can be owned by thousands of individuals who have no direct input on day-to-day operations. You cite the example of Exxon, but in that case, the corporation did not run that ship into Alaska, there was a dereliction of duty on the part of one or more individuals. Also, keep in mind that in recent years, the corporate veil has been pierced and officers of some corporations were held responsible. Ken what's-his-name of Enron comes to mind and there have been others.

The reason why corporations (or something like it) are so necessary, and I'm a staunch Libertarian (and actually, Libertarianism and corporations are not necessarily at odds, but that's a different subject), is that the public in general and trial lawyers specifically would hold an owner of the company liable, even if there was no evidence that he or she was responsible for whatever happened and it was an employee that caused a problem, for example (respondeat superior). So, I used to be an owner/operator of my consultant business, filed Schedule C Sole Proprietor, et al, but I didn't want to go onto a client's premises, install a computer and have something happen that I would have no control over and then have that company take my house and property as result of loosing a law suit-even if I was not directly responsible. So I formed an LLC to protect my personal property. That's reality and one of the few problems I have with official Libertarian ideals-it's not the late 1700s anymore so somethings need to change to reflect that.

The other problem is that I really believe that it is exceedingly rare for a corporation (meaning its officers or official policy making arm) to make a deliberate decision to make something unsafe. No one can think of every situation and plan for every possible event. There also needs to be the concept of personal responsibility on the part of the consumer of the company's products. It's like holding a riding lawn mower company liable for the death of a child when the rider of the mower put the mower in reverse and didn't look behind him-as tragic as that is, how is that the fault of the company? It's probably why my riding mower came with a kill switch when it was put into reverse and the blade was engaged, which I promptly bypassed (what good is a mower that can't go in reverse?). Yet someone sued over it. It is probably why there are warnings on a blow dryer not to use in the shower and it goes on and on. That's why tort reform is so important to me. I'm not advocating removing the ability to seek damages from a company but there also needs to be some sort of frivolous law suit penalty, maybe forcing those who loose to pay for the legal fees of the opposer; but something needs to be done.

But this whole business with Microsoft is just so tiring and old. It is so amazing that some really smart people are reduced to emotional wrecks because they exist-and some of those are on this forum. It also is so amazing that many companies, including me, can successfully compete against them yet others cannot and what do they do? They go whining and crying to the government to "level the playing field". What's funny about many in the Open Source and Linux crowd, is that they assume that everyone will choose it over Microsoft, and when someone doesn't, it automatically is because Microsoft is an ugly, evil, monopolist company and not because for whatever reason, they want to go a different way.

Microsoft is not just competing unfairly...

Glyn Moody's picture

Although I applaud your even-handedness – Voltaire would have been proud of you – it seems to overlook the fact that Microsoft is not simply competing unfairly, but is hacking the larger regulatory system that controls that market.

For example, it's manipulation of the ISO process over OOXML is nothing to do with competing unfairly within the system, and everything to do with abusing the system to the point of destruction. Similarly, in the UK, use of free software by government is minimal, because the procurement system is in thrall to management consultants – ex-civil servants paid huge fees to work with their old colleagues - who, are themselves hand in glove with Microsoft.

I can't see plucky little open source doing much about this systemic problem on a short time scale. Maybe I'm just too impatient to wait the decades for slow dripping to wear away the Seattle rock, but I'd rather somebody – even Neelie Kroes – got stuck in and levelled the playing field somewhat. And that's what it's about: not about deciding who is good or bad, but about making it the same for everyone. Fines are just a means to that end – and ones that may, for the reasons I mention, actually have an effect this time.

In response to Eric and Glyn's comments...

SeanHodges's picture

This is a good response to Eric's (powerful) arguments.

It is obvious that the IT industry needs to shift. If actions aren't made in the short term, there will not be an industry to speak of in the future, just "Microsoft" and "Microsoft Partners".

I understand Eric's comments, and I feel they should be in the front of peoples minds when government intervention is made like this, but despite this I think the fine is a good thing. Microsoft are already affecting the future of computing in their favour (through abusing regulatory systems amongst other things) and a counter attack needs a body at least as influential as Microsoft in order to make a difference.

Microsoft sabotage

JJJoseph's picture

Mostly I'm in favor of letting the market work this stuff out, but some things that MS is doing are really diabolical. For instance, I can't submit an employment resume to a job search site because they all require a genuine MS Word .doc file. OpenOffice .doc files are zapped. And Simply Accounting won't read an .xls spreadsheet unless it's a genuine MS Excel file. This happens because MS hands out (to developers) C## file reading widgets that verify genuine MS bona fides in files. Now _THAT_ is sleazy behaviour. There's nothing the marketplace can do to defend itself against this type of sneaky sabotage. Way to go, Europe! Slap the buggers! This time they need it!

Now _THAT_ is sleazy behaviour.

Anonymous's picture

This is the place that needs a lot of attention.

The dark little cracks where the sleazy MS real talent hides.

OOXML is just the tip of the iceberg.

The problem is that if OOXML goes through , the sleazy behaviour from Microsoft will gain momentum. If the ISO stops the OOXML ploy, the sleazy behaviour will only slow down for a while until Microsoft deploys its next dirtball move.

Add me to the list of naysayers

EricRaymond's picture

I doubt anyone is going to accuse *me* of a desire to make life too easy for Microsoft, so let me make the countercase. Yes, taking down the boys in Redmond should be left to the free market -- which, in this case, is us. That is to say, the Linux community and its corporate allies.

The overriding reason to reject "antitrust" is the same reason "hate speech" laws are deadly to a free society. They may seem like a good idea if you are narrowly focused on one egregious example, like Nazis publishing blood libels against Jews or Microsoft's tied contracts with OEMs and the attempt to ram OOXML through ISO. But the powers that such laws grant to governments are, in the longer term, incompatible with liberty.

Because...who decides what is "hate speech"? or "unfair competition"? There is no bright-line test in either case, and the boundaries are always interpreted politically. Which means that both hate-speech and antitrust laws always become the tools of entrenched power against upstarts and disruptors. The longest-running monopolies in U.S. history were created and popped up by government fiat; AT&T stands out as an example.

As much as I loathe Microsoft, I defend its freedom to compete "unfairly" for the same reason I defend a Nazi's right to spew venom -- because ultimately it is my own freedom I am defending in both cases. The expansion of government power to stifle dissent and rig markets is more dangerous to my liberty than Microsoft or the Nazi will ever ne.

Re: Add me to the list of naysayers

Anonymous's picture

> Because...who decides what is "hate speech"? or "unfair competition"?

Who decides what is "menace"? or "harassment"? Here also it isn't easy to draw the line, but that doesn't mean those things shouldn't be punished.

How to get Microsoft to quickly comply

Sum Yung Gai's picture

Simply ban the sale of their products in the EU. Or, failing that, make it illegal to pre-install MS products on PC's. Rather, make it so that the end user actually has to pay that retail $199 or $299 or $399 for that version of Windows Vista that they want (XP is "obsolete" now, remember). Also, make sure they pay that retail $350 or $495 for MS Office if they want it. Is this fair? In the case of a convicted monopolist, yes.

Remember, it's the preinstall market that keeps MS going, because the end user is under the illusion that "Windows comes free with the computer." Oh, and require OEM's like Dell, etc. to offer an alternative OS on the same drop-down boxes as the (much more expensive) MS products. A distribution of GNU/Linux is a good choice, say Kubuntu LTS or CentOS.

Yes, this would work very well. Recently an enterprising teacher with a technical background gave the students the choice of MS Windows or Linux, and MS Office or OpenOffice.org, for their own personal computers. Since the school decided to buy the MS Windows licenses, the students chose MS Windows. However, the school did not buy the MS Office licenses, so the kids had to pay for that. Guess what they chose? Right, they "discovered" how good OpenOffice.org is! Funny what happens when you see what it really costs you....

BTW, the captcha characters are quite difficult to distinguish. Took several tries before I found a legible one.

--SYG

So, punish all system builders, right?

Mark Dean's picture

That's what it would do. I'm a small time systems builder and I sell both pre-installed Linux and Windows. So you would make it a crime for me to buy my OEM version from Microsoft at a reduced rate and bundle it with the computer? That's ridiculous especially since Microsoft products are often *requested* from me.

You are not a lover of freedom of choice that's for sure. Or maybe you want the freedom of choice to be only things you approve of.

A new idea just occurred to

Anonymous's picture

A new idea just occurred to me - while the EU is very interested in keeping MS in line with their laws, we in the US are happily shelling out a huge chunk every payday to the government so they can buy bug-ridden software that opens up government computers to hackers and threatens our national security. Then we take what is left in our wallet and send it directly to Microsoft so that hackers can get into our computers as well. Wouldn't MS be ahead if they shut down their European operations (where business as usual is getting expensive for little return) and stuck to doing business only with fools?

That's what I'd do

Mark Dean's picture

I agree with you. If I were running Microsoft, I'd close down all European offices, which would put all those folks out of a job, probably thousands of people. I'd also invalidate all licenses, which as we all know, can be done according to the EULA we all click "I Agree" to, and aggressively go after anyone who lives in a country part of the EU and sue them to uninstall all versions of Windows. I'd use netcraft to verify that web sites that are based in the EU were no longer running IIS.

People would cry and moan about the economy and jobs lost but I'd laugh and say, see what socialism got you?

For the mathematically challenged

Anonymous's picture

As always, Glyn Moody does a brilliant job.

I just wanted to add for the mathematically challenged that the total amount Glyn quotes (1.6767 billion euro) is at today's exchange rate over $2.5 billion. And that's not small change even for Microsoft.

Accounting Question

Anonymous's picture

"The second question – whether such fines have any effect – "

Do these fines even matter?

Can Microsoft deduct these fines as a business expense?

Is the EU Microsoft and the US Microsoft the same corporation?

Any accountants for big business out there?

These Microsoft fines seem to run like water off a ducks back... just a cost of doing dirty business.

Corporations in General

Phil Hughes's picture

We all seem to forget that a corporation is something that a government allowed to be created. I highly recommend watching the movie The Corporation. You can find the info on their website.

The basic argument is that as a government has allowed a new "entity" to be created that doesn't have many of the things a natural person has (in particular, a finite lifespan and a social conscience), it is the government's responsibility to limit the power of this new entity.

Fines are certainly one way—probably the most popular way—to try to control these entities but not the only way. In fact, the ultimate way is to terminate the corporation's charter. If this was even perceived as a real threat, it could cause corporations to be forced to make decisions not just based on their own profits.

Note that this movie is not anti-corporation per se, it just makes the point that current corporate law encourages and may even require a corporation to act in a way that, if applied to a human, would be called psychopathic.

Phil Hughes

Good idea - but could it ever happen?

Glyn Moody's picture

Imagine the squawks from all the rich and powerful shareholders being dispossessed in this way.

But I couldn't agree more about need for some kind of "social conscience". A good place to start might be insisting that companies take into account externalities like the environmental damage they cause, and taxing them accordingly....

Keep in mind who the "rich and powerful" shareholders are

Mark Dean's picture

Be careful, often times, these are regular folks who have invested in a corporate stock and it also includes many a regular "working man/woman's" 401K, 403b, IRA, etc. retirement programs. Keep in mind too, it is the shareholders who own the company, and it is shareholders who pay the taxes and get hit with any expenses in the sense that if a corporate entity is hit with fines and taxes, it means less profit and less dividends to the shareholders as well as less value of the stock.

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