Bill Gates versus Brussels - The European Union Action on the Microsoft Monopoly - Essay Example

Running Head: THE EUROPEAN UNION ACTION ON THE MICROSOFT MONOPOLY Bill Gates Versus Brussels- The European Union Action On The Microsoft Monopoly [Writer's Name] [Name of Institute] Bill Gates Versus Brussels- The European Union Action On The Microsoft Monopoly European Union And American Monopoly - An Introduction A hundred or more years ago, the threat of monopoly might have been greater than it is today because of the limited variety of resources available within given markets. A firm might conceivably corner the market on a given resource--for example, iron or bauxite ore--for which there were no available or nearby substitutes, and then restrict production with the intention of increasing its prices and profits. In such a case it might have been quite difficult for other firms to devise substitutes in any reasonable amount of time. The new world of the web, of global capital, of footloose businesses and of rapid technical change is teeming with opportunity. It is also making the old political ideas look rather dated. The relentless movement to a global market is giving ever more scope to the English-speaking world to sell its computers, its information, its culture and its entertainment. It is making national government solutions irrelevant or unhelpful, as the pace of change outstrips the capacity of individual governments to keep up (McKenzie, 2000, Pg 2-3). This report is likely to lead to a trial of strength between two cultural and governing systems: the US democratic free trade one, and the Europe bureaucratic and regulated one. The 1950s and 1960s were dominated by a conflict between the communist and capitalist models, which was finally won without a shot being fired in anger between the two main protagonists, the US and the USSR, when the Western model proved so much more capable of delivering economic success. The next 20 years are likely to be dominated by a contest between the Europeans who think that governments can make societies better, and the North Americans who think free enterprise makes a bigger contribution to health and riches. The beginnings of the conflict are there for all to see, in the escalating trade disputes and the outlines of a row over independent European forces and foreign policy. US policy-makers will have to pull back from their enthusiasm for this emerging super-state and take stock of their position. They will find that what they may gain in a simpler command structure in Europe as one government displaces many; they will lose in terms of influence and friendship as that government sets out to rival the US. They come together when there is a problem or a purpose. The World Trade Organization makes good progress in spreading free trade ever more widely. It is organizations that try to become alternative governments that threaten the spirit of the age, and threaten to burden participating countries beyond their patience. Many very smart people, all of who were building on each other's good ideas and hard work, wrote the history of personal computing. However, that history was in no small way pressed forward at an ever-faster pace by developments at the Microsoft Corporation, which just happened to be founded at the start of the last quarter of the twentieth century and which is today the world's premier software company, dominating many of the markets it has entered and developed. What is remarkable today, at the start of the twenty-first century, is that the Microsoft Corporation finds itself under legal assault by the federal government, plus nineteen states. Microsoft Monopoly - An Introduction Is the fear of such a monopoly justified as we move into the new millennium, especially in software markets Microsoft likes to characterize itself as a software or Internet company whose main products are "digital" in nature, a claim not many industry observers, even those in the Justice Department and the trial judge, would dispute. If the characterization is tolerably accurate, it follows that Microsoft's main products can be represented as very long sequences of 1's and 0's, which, when you think about it, are not likely to be a source of vast and enduring monopoly power, since 1's and 0's can be duplicated in various arrangements without end by practically anyone with a few good ideas on how the 1's and 0's should be arranged. What is remarkable is how many people in today's world economy--hundreds of thousands, if not millions--are hard at work trying to come up with alternative, competitive rearrangements of those two digits. The firm's market dominance is likely to be cut short if it mistakenly equates its market dominance with monopoly power and thinks it can live the quiet life of the monopolist (Dettmer, 2004, Pg 55). Even Microsoft feels compelled to rearrange its digits as frequently as it can, mainly because, as Bill Gates has observed, "In three years, every product my company makes will be obsolete. The only question is whether we will make them obsolete or somebody else will." Yet, in this world of rapid change that runs according to Internet, not railway, time, the government has sought to take Microsoft to court on the grounds that the company has managed to corner the market on a formula that at its digital core consists of various sequences of 1's and 0's. Although it has a copyright to a particular, extra long sequence of 1's and 0's, the number of combinations of potentially productive 1's and 0's must be extraordinarily large, if not infinite. These observations about the ultimate resource foundation of any category of software do not prove that Microsoft is not in violation of the country's antitrust laws, but they certainly are intriguing. Before we buy in to the Justice Department and judge's claims, we should pause and reflect, "In this digital age, could Microsoft really have done what it has been accused of doing, monopolized its markets and then exploited them to the extent that the Justice Department claims Could it continue to do so for as long as the judge imagines" If it has done that, it has pulled off an amazing feat, given the worldwide abundance of 1's and 0's and the ease with which, in Internet time, various sequences of 1's or 0's can be shipped to all points on the globe. If Microsoft is the monopoly it is supposed to be, then it must have every intention of continuing to exploit hordes of consumers, many of whom are sophisticated buyers for large transnational corporations, and it must have the capacity to prevent the hordes of programmers around the globe from coming up with their own strings of 1's and 1's. Is it really believable that a single firm in the digital age could pull that off The answer the Justice Department and judge want us to believe challenges plausibility, although, as will be seen, it cloaks its claims in new digital age theories that will be assessed. Nevertheless, the thrust of the case starts with five main claims: First, following well-worn twentieth-century antitrust enforcement norms, monopoly power is largely determined by market share (especially with regard to major industries that are national in scope and critically important to the health of the national economy) and by barriers to entry. A sufficiently high market share thus can be equated with monopoly. Second, special characteristics of software markets--"scale economies" in production and "network effects" in demand--impose barriers to entry that permit the dominant (or monopoly) firm to impose its will on market participants, consumers and computer producers. Third, since Windows is installed on more than 90 percent of personal computers, there are no commercially feasible substitutes, and there are scale and network blockades to entry. Hence, Microsoft is a monopolist. Fourth, if a firm has monopoly power in one market--for example, operating systems--it can use that power to dominate and monopolize other markets--for example, Internet browsers--and then use the extended dominance in other markets to protect its original monopoly position. Fifth, Microsoft has used its monopoly authority to expand its marketplace supremacy to Internet browsers and therefore to defend it's operating system monopoly in four main ways: 1. Microsoft has engaged in illegal "predatory" (zero) pricing against its market rival Netscape with the intent to destroy any existing or probable threat to its operating system market. 2. Microsoft has illegitimately joined Internet Explorer to Windows for the reason of limiting Netscape's distribution of its browser, Navigator, and Netscape's capability to build up a substitute operating system platform. 3. Microsoft has unlawfully developed exclusionary agreements that have requisite computer manufacturers and Internet service providers to give confidence and assign only Internet Explorer, thus once again choking off opposition from Netscape. 4. Microsoft has harmed consumers, by restricting consumer choice (which would be greater with both Internet Explorer and/or Navigator programs on their personal computers' hard drives and both icons on the desktop) and by impairing innovation in the software industry. Microsoft has made a lot of money, as fully noted. However, this is no reason to cast Microsoft neither as either the devil incarnate nor as an angel on the wing. More realistically, Microsoft is an aggressive but constrained competitor. Again, the Microsoft case is taken up here not because of deep concern for Microsoft per se, but rather because the economic and legal principles that run through the case could have broad application to many other American firms, especially those in the emerging high-technology and information industries. From the perspective developed in this report, it would be a shame if Microsoft were penalized for its market strategies, mainly because such a conviction would have a broadly chilling effect on American competitiveness in the emerging information age. What's Microsoft up And About in Europe As the software gigantic company, Microsoft look for to bring an end to its four-year encounter with the US Justice Department, the company has approached beneath rising inspection in Europe. The European Union's verdict against the software mass Microsoft will have far- variety allegations. Microsoft met with European Union controllers for the last quite a few months, demanding to beat out an agreement. The European Union's crown trustbuster, Mario Monti, and Microsoft CEO Steven A. Ballmer recognized that they could not determine their five-year old anti- trust argument. Now, Monti is moving onward with a decision that will find Microsoft (MSFT) culpable of monopolistic actions and necessitate it to radically modify its business performance in Europe. The European Union, it seems that wanted a means to decide future grievances rapidly. And the incongruity over that confirmed to be the agreements downfall. Watchdogs from the 15 European Union states met in Brussels on March 15 and 22, 2004 to evaluate the case. Even though a resolution is still probable, lawful analysts consider the national authorities will offer European Union Competition Commissioner Mario Monti a green light, reimbursement the method for a concluding decision (Jay, 2005, Pg 1). In February 2000, the European Commission commence a study into Microsoft's Windows 2000 operating system, at variance that Microsoft had ill-treated its foremost place in desktop computer operating systems with the start on of its Windows 2000 software in the server marketplace. That act was taken on the European Commission's own scheme, but was holded up by Microsoft's opponents who offered confirmation. This examination was pursued by a protest in August 2000 by Sun Microsystems that Microsoft occupied in prejudiced licensing and declined to provide indispensable information on its Windows operating scheme. The European Commission's verdict to fine Microsoft Corporation a testimony of $612 million and regulate the software gigantic to transport a description of its Windows operating system deficient with the Media Player within 90 days will have small straight force on consumers or Microsoft contenders (DiDio, April 5, 2004, Pg 1) As part of the judgment, the European Commission also gave Microsoft 120 days to announce its operating system basis code to make it effortless for contestants and software developers to inscribe well-matched software appliances and inter function with Windows. The $612 million charge, the uppermost European Union has ever forced, symbolizes just fewer than 2 percent of Microsoft's universal profits. Under European Union trade laws, Microsoft could have acknowledged rigid punishments adding together up to 10 percent of its twelve-monthly sales. Microsoft is pressing out opponents such as RealNetworks Inc. The worry is that modernism in digital media could be muffled if PC makers, substance providers, and consumers have smaller number of choices in such software. Right now, 64% of Europeans utilize Media Player versus 22% for RealNetworks' RealPlayer and RealOne contributions. Microsoft's European Union Tussle - In Brief March 2004: European Union strike Microsoft with record 497million euro charge; instruct the company to inaugurate its hub software systems to opponents and construct an uncovered down adaptation of Windows December 2004: European Court of First Illustration castoffs a plea by Microsoft January 2005: Microsoft reverse down from additional European Union petition court acts March 2005: European Union cautioned that Microsoft is doing insufficient to meet the terms with anti reliance decisions May 2005: European Union strikes Microsoft with 1 June time limit to put forward a reaction to verdict 1 June: Microsoft meets up time limit. The Final European Union Decision - The European Court Mario Monti from European Union wants to confine Microsoft's demeanor in turn to both cure suspected precedent mistreatments and put off upcoming ones. In the European Court Microsoft will be compulsory to construct two adaptations of Windows for the European marketplace, one that comprises the Windows Media Player, used to observe videos and listen to music, and one devoid of. The decision will also necessitate Microsoft to disclose information to contestants about how its Windows operating system interrelates with Windows Media player and with Microsoft's server software. Mario Monti met with rivalry controllers from the 15 European Union affiliated states to converse how much in financial punishments to charge against Microsoft. European law permits a charge of up to 10% of a company's profits, which could total to a $3.2 billion strike for Redmond (Wash.) software mass. More possibly, nevertheless, the charge will be a smaller amount, in the hundreds of millions of dollars only. Outcome Of The Case It is approximately positively probable that Microsoft will initiate an appeal for this case from European Union. The initial avenue of petition is with a board based in Luxembourg called the European Court of First Instance. Microsoft would probably inquire for a hang about of the European Commission cures. Brussels lawful specialists are divided on how possibly Microsoft is to obtain a ban. It would have to reveal instant and noteworthy economic damage from the therapies, an elevated obstacle that few applicants have in the past vacated. But there is lawful model for commands, so Microsoft might be capable to have the European Commission's remedies put on hold pending appeal (Online, 2005, Pg 1). Microsoft could ask the Court of First Instance for an expedited review of the European Commission's decision -- a procedure that would take about a year's time -- but it might not be competent to influence the court to go faster than its agenda. An ordinary petition could take two to three years time. If the court then regulates in opposition to Microsoft, it would have one more blast at plea, with the European Court of Justice -- the European Union's correspondent to the Supreme Court. The long-standing insinuations are intimidating for Microsoft. Once Monti regulates that it has ill-treated its leading market place by collecting novel applications into Windows, Microsoft has to be extremely cautious about adding whichever new features to its operating system. The model-making decision could make it simple for the European Union to convey future events against Microsoft. On the other hand, each case would have to be act against on its character merits, counting thorough economic statistics and investigations. It does not give the European Union Carte blanche to be carried Microsoft's support everlastingly. TABLE 1. Microsoft's Actual and Projected Percentage Share of the Intel-based Operating System Market (figures compiled by International Data Corporation) Operating System1 Year4, 5,6 1991 '92 '93 '94 '95 '96 '97 '98 '99 2000 '01 Microsoft 2 93 92 93 93 90 94 95 95 95 95 96 IBM OS/2 0 3 3 4 7 3 3 3 3 3 3 UNIX 3 0.2 0.2 0.2 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 Other Intel 7 4 4 3 3 2 2 2 2 2 2 1Operating systems used in single-user client and PC operating environment. 2Includes Microsoft 16-bit and 32-bit Windows and MS-DOS. 3Intel-based UNIX operating 4Market shares may not total 100% due to rounding off. 5The market shares for the years 1997-2001 are forecasts. 6Worldwide SOURCE: U.S. Department of Justice, Antitrust Division Web site, at: http://www.usdoj.gov/ atr/cases/exhibits/1.pdf. Other Companies Complaints Against Microsoft The European Union charges Microsoft of using the " overpoweringly controlling place" Windows takes pleasure on personal computers to assist its muscle into the increasing marketplace for low-end servers. Sun Microsystems, IBM and further companies protest that Microsoft plans Windows to labor improved with its own server software than opponent contributions, giving it an unjust benefit. The European Union also claims that by constructing its Media Player into Windows, Microsoft is forcing out opponents such as Apple Computer and Real Networks, which also make software that plays digital video clips, music files and such novel substance as Internet radio. The media player argument repeat the browser conflict in the U.S. happening among Microsoft and Netscape -- in which Netscape was the pacesetter and was compressed as Microsoft influenced its operating system supremacy to errand its Internet Explorer. The European Union said its review of music and movie companies, as well as software developers, established that "ubiquity" of Microsoft's Media Player declines opposition and " smother creation modernism and eventually decrease customer alternatives." The European Union, for instance, concludes that online publishers gradually more are accepting Microsoft's proprietary statistics formats because Media Player is previously constructing into most fresh adaptations of the Windows operating system, said one industry executive recognizable with the investigator who spoke only on situation of anonymity. The European Union suggests that Microsoft present a version of Windows devoid of the Media Player or comprise opponent players along Windows. Microsoft also would have to reveal more of its awarded software system so opponents in the server market could make products that labor as faultlessly with Windows as Microsoft's own. Microsoft has balked at giving away what it believes proprietary data. "We don't want them to reveal the entire working of their system," Lueder said. "We only want them to reveal that protocol information that is required for them to fully interoperate." Microsoft Guilt Sentencing Microsoft culpable for boiling opposition in the media player market is a dress practice for the superior and more noteworthy encounter to come. What happens if the European Commission pronouncement succeeds It will compel Microsoft to advertise two splitted versions of Windows-an uncovered adaptation devoid of the Media Player and a packed version with the Media Player. The European Commission, in its understanding, says Microsoft cannot present any of its PC producer partners, such as Dell Computer, a reduction to advertise the adaptation of Windows packaged with Windows Media Player. In reality, there was no pragmatic possibility for Microsoft to keep away from the European Commission decision. Microsoft said it would confront the European Union's conclusion, which it called baseless. Factually, Microsoft's supremacy in Windows promises Media Player a close to worldwide spectators of PC users. But not anything prevents customers from using competitors media players, counting Apple's QuickTime or Real Networks' RealPlayer, every one of which are obtainable for buying as a complete-characterized parcel or as a free of charge, baseline system downloadable from the internet network (Ingram, 2001, Pg 1, Online). Many people of the field suggest that the charge obligatory by the European Union is not adequate. The European Union made a position by declaring in opposition to the company, up till now it disastrous to oblige a genuine pecuniary punishment on the company. By a genuine punishment, it means a charge of the order of $5 billion, not $600 million, which is merely approximately 2 percent of profits and about 0.5 percent of ready money on the balance sheet. Conclusion The 2004 verdict necessitates Microsoft to document data to guarantee that its contestants can expand goods that inter-function with the Windows area structural design sustained in Windows consumer PC operating systems, and therefore facilitate them to contend with Microsoft's workgroup server operating system. Microsoft is supposed to permit the make use of the revealed stipulations for accomplishment in workgroup server operating system goods. Microsoft has equipped more than a few versions of the technological documentation since the 2004 verdict, and not any has fulfilled with the necessities of that verdict. For all of these causes and more, the Department of Justice did not establish an all-encompassing monopolistic performance. The conclusion here is thus far another feature of how Microsoft is located to mistreatment it's standing. Yes I agree, Microsoft has a monopoly marketplace situation, but it is not completely the consequences of monopolistic actions. That is not to say that I support of having one enormously leading software player in a market; I do not. But on the contrary, I do desire to see Microsoft's situation weakened; I do agree to see more antagonism in the marketplace; and I want to see unlock foundations resolutions becoming more widespread. So, precisely, Microsoft has not revealed all the performances of a factual monopolist, even though its market situation shows it to be, effectively, a monopolist (Microsoft EU Monopoly on Last Leg, 2003, Pg 1, Online). The European Union's Monti has his individual view and sets down a therapy that I consider is not based on what clients wish for but what opponents insist. His major grievance fundamentally is that Microsoft is excessively big. I agree. Nonetheless, that is not actually the point of the U.S. monopoly commandments, and why I think the judgment is simple expropriation, somewhat that the regulation of law. I consider that, in long term; Microsoft is departing down for the reckoning and has been documenting about this for the preceding 18 months. But I imagine it will take an extended time -- conceivably over 10 years. But above time, unwrapped resource code novel software is heading for devastating Microsoft, regardless of what takes place. Bibliography Dettmer Jamie; Insight on the News, 2/17/2004, Vol. 20 Issue 5, p55, 1p. Item: 12194031. Jay Greene, in Seattle; Steve Hamm, in New York and Andy Reinhardt, in Hannover, Germany, What's Microsoft Up Against in Europe, (2005). Pg 1. McKenzie B. Richard; Trust on Trial: How the Microsoft Case Is Reframing the Rules of Competition, Perseus Books (Current Publisher: Perseus Publishing), Cambridge, MA, (2000). Page Number: 1-47. Microsoft EU Monopoly on Last Leg, Associated Press, (2003-08-07). Pg 1. http://www.wired.com/news/business/0,1367,59923,00.html Ingram Mike; European Union extends investigation of Microsoft, (4 September 2001). Pg 1. http://www.wsws.org/articles/2001/sep2001/eu-s04.shtml Ingram Mike; European Union widens anti-trust case against Microsoft, (9 August 2000). Pg 1. http://www.wsws.org/articles/2000/aug2000/micr-a09.shtml DiDio Laura; EU Slaps Microsoft with Record Fines, Sets Stage for More Action, (April 5, 2004). Pg 1. http://techupdate.zdnet.com/techupdate/stories/main/EU_Slaps_Microsoft_with_Record_Fines.html December 22, 2005 (IDG NEWS SERVICE) - Brussels. Pg 1. http://www.computerworld.com/softwaretopics/os/story/0,10801,107277,00.html Read More