Microsoft and the devil's advocate

Anyone expecting contrition from Microsoft after the EU ruling will be disappointed. Aggression remains the order of the day

I spoke to one of the lawyers representing Microsoft in its fight with the European Commission on conditions of strict anonymity. He said: 'If you use my name, I'd have to jump out the window.' He then used this anonymity to pour scorn upon the European Union's recent ruling against Microsoft, which found the company guilty of abusing its monopoly powers in the market for media player and server software, and levied the largest ever fine in a European competition case. He was about as far away as you could get from an uninterested party, but it was instructive to watch him play devil's advocate for Microsoft.

The playwright David Mamet has observed that you can skip the first year of law school if you figure out that the important thing is not the rights or wrongs of the argument -- but what you choose to argue about. Our lawyer may not have taken Mamet's advice, but he was very keen to argue about the media player.

Microsoft has some good arguments on the media player issue. Downloading a small application like Microsoft's Media Player, Real's Network player, or Apple's QuickTime takes the blink of an eye with a decent broadband connection, which undercuts the impact of its bundle with Windows. The company also bent over backwards in its proposed settlement by offering to make it even easier for its competitors.

"The ridiculous thing is that Microsoft offered to install at least three extra media players, two selected by the Commission, the third chosen by the OEM, plus even more on a CD and a DVD with the system -- but Monti turned it down," said Microsoft's lawyer.

However, another UK lawyer who is not working for Microsoft points out the EU still has the right to bust Microsoft if the bundling has the overall effect of unfair competitive advantage - even if that advantage might seem relatively slight. George Peretz, a competition lawyer with Monkton Chambers, argued that if Microsoft floods the market with PCs featuring its media player it may a momentum which Real, Apple, or other rivals may struggle to overcome.

"It's a question of fact. The fact is that the media player comes free. You would have to show it made no difference at all, and I don't think that's right," Peretz.

However, the proposed remedy actually looks a bit silly. The European Commission ruled that Microsoft must provide a version of Windows without Media Player -- at the same price as the one with it. Let's assume for argument's sake that the ruling is based on the laudable goal of preventing Microsoft from the creeping extension of its Windows monopoly. We don't want Redmond to dominate our CD player, DVD player, and photo album in the way it does our PC. Will the remedy work?

It seems very unlikely.

As Microsoft's mystery lawyer put it: "The remedy is ridiculous and it's based on the notion that you only have one media player. You can have many. As a consumer, my son has six media players on my system. The unbundled version without player is not going to change anything. It's an open secret," said Microsoft's lawyer.

I sensed some genuine frustration here, given Microsoft's attempt to defuse this issue in its settlement proposal.

Yet that Microsoft's zeal in offering to act as a distributor for its competitors actually confirms the Commission's underlying fear. Even if Microsoft paid to send a liveried servant around to every customer in Europe, proffering a basket of CDs with alternative software, most would probably say, 'Not today thank you,' and carry on using whatever software appeared by default on their desktop. So here I fear the Commission's ruling may have been well-meaning, but essentially pointless -- except in so far as it has publicly busted Microsoft for anti-competitive bundling in the media space. This sets a precedent for future and more important battles in the market for digital media, a legal precedent that clearly has business implications in other markets: otherwise why is Microsoft so keen to avoid it?

After he'd trashed the media player ruling for a while I had to gently suggest that Microsoft's lawyer address the other half of the EC's finding, the ruling on server interoperability. Here he was much less convincing. His first instinct was to deny that server interoperability was an issue at all, implying that any problem Microsoft's rivals might have had linking to Windows were just par for the course in the crazy mixed-up world of enterprise computing.

"Is there a problem? All large companies live in a very heterogeneous environment, and all those products must work together," he said. Then he made the unconvincing claim that Microsoft had offered to provide its competitors with communication protocols 'which would cover all possible situations' -- a noble aim in theory, but one which sounds a little unlikely in practice.

Then he changed the subject, a move which I felt at least in part reflected the relative weakness of Microsoft's position here. Instead he switched to a personal attack on the EU's competition commissioner, Mario Monti.

"For me it all boils down to a question of vanity on the part of Monti. He caused Ballmer to come to him at the eleventh hour -- and he resists, and then imposes the highest fine ever. It's a job that has attracted people with a chip on their shoulder. He couldn't resist the temptation of imposing the highest fine ever -- it's like an addiction," he said.

Hmm. Not very pretty. I'm sure we can expect more of this sort of thing during the appeals process.


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