Chinese antitrust and Microsoft

Chinese antitrust and Microsoft

Summary: As reported elsewhere and discussed by other ZDNet bloggers, a new antitrust law will come into effect in China on August 1st, and there is speculation that the Chinese government is using that law as basis for an investigation into the company. Not surprisingly, this brings a smile to the face of those with a habitual dislike of the "beast of Redmond.


As reported elsewhere and discussed by other ZDNet bloggers, a new antitrust law will come into effect in China on August 1st, and there is speculation that the Chinese government is using that law as basis for an investigation into the company. Not surprisingly, this brings a smile to the face of those with a habitual dislike of the "beast of Redmond."

Be careful what you wish for. China is a nation that has just started its journey towards integration into the global trade system, and its government already works fairly hard to tip the playing field towards its own companies. Antitrust, given its wide open nature, is one heck of a tool for mischief in the hands of governments whose real goal is to protect its "national champions."

Take this quote, grabbed from Richard Koman's blog:

“On the one hand, global software firms, taking advantage of their monopoly position, set unreasonably high prices for genuine software while on the other hand, they criticise Chinese for poor copyright awareness. This is abnormal.

By that standard, Hollywood should be shaking in its designer boots, as their wares are the most pirated in the world, and the prices they charge are, when converted into Yuan, quite high for the average Chinese person.

On the issue of prices (Richard says it costs over $1,000 in China for Windows plus Office), I'm assuming he is talking about the "off the shelf" price versus the OEM price. "Off-the-shelf," Windows plus Office costs about $1000 in the US (though few pay that, as most get both as part of new computer purchases, where costs are much lower). Microsoft's crime, it would seem, is to charge western prices in China, something they are changing somewhat, but is still very common around the world. One possible solution (and one I'm sure would spring to the minds of US politicians) is to allow the Yuan to float. If it were floated, the price of Microsoft software would reduce dramatically in China, because each Yuan would translate into more dollars.

It's worth remembering that antitrust is NOT covered by any global trade agreement. That means that governments are free to define antitrust however they please. Given that other protective tools are proscribed by such agreements, don't be surprised if antitrust becomes the next best thing.

To my mind, encouraging antitrust is a bit like encouraging an Alcoholics Anonymous attendee to go out for a few beers after work. Though I've nuanced my views on antitrust over the years (I see theoretical scope, a theory that is often widely missed in practice by ham-fisted bureaucrats), I still find it worrisome.

Topics: Microsoft, Enterprise Software, Government, Government US, Security, China

John Carroll

About John Carroll

John Carroll has delivered his opinion on ZDNet since the last millennium. Since May 2008, he is no longer a Microsoft employee. He is currently working at a unified messaging-related startup.

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  • Irony...

    Chinese Government is the biggest monopoly of all.
    • But Bill Clinton, then his wife, THAT's choice and freedom right?

      Well done little sheeple.
  • To the previous poster...

    Truer words have never been spoken (posted this at the wrong level)
    John Carroll
  • RE: Chinese antitrust and Microsoft

    why would China care about the retail price of microsoft products in light of such cheery articles as these:

    "only 244 copies of genuine windows vista sold in China"
    "Microsoft Gets Slapped for Fighting Windows Piracy (in China)"
    "Huge Chinese piracy ring tackled"
    "Windows piracy check: Foiled again"
    • Compensation

      Microsoft is not the only company with objections to how rife piracy is in China. The pressure to comply with international law is increasing, and because China wishes to be a member of international organizations, the ability to impose sanctions nationally and internationally is becoming more definite.

      China can use anti-trust as a weapon against any company whose products are sold in the country. Regulators could follow the example of Mario Monti, who believed that penalties for excessive market share could apply to companies with as little as 15% of the market.

      The EC idea that regulation can be used to determine market share and to eliminate the profitability of companies with products people want to purchase obviously has appeal in China.

      Neelie Kroes recently observed that Microsoft had the timerity to be slow to follow the (vague) dictates of her all-powerful agency. And therefore that people must use open source to demonstrate that capitalism is a one-way street. Her way.

      This kind of attitude is obviously appealing to a dictatorial government. Which has the comfort of knowing that, unlike Ms. Kroes' agency, it has the power to jail any company or customer which refuses to do as it is told.
      Anton Philidor
      • Monopoly and Communism

        The EU is representing democratic principles. Monopoly is
        not condoned within democracies because they balloon
        larger than the social institutions that are suppose to
        contain them. The promise of democracy is as a container
        for different opinions and ideologies. It is not an ideology
        itself. The open market is the charge of a democratic
        constitution through law. When a single commercial
        interest subverts that open market, it is seen as a move to
        replace a vote with a dollar, and (rightfully) it is not

        What I'm trying to say here, is that any problem with China,
        starts with Communism.
        Harry Bardal
        • Although...

          ...if you are going to talk about "voting," a process where you "vote" by spending dollars is vastly more democratic than a "vote" from a choice of two parties in the United States. It is vastly easier, in other words, to vote not to spend your money in one place than in another, at least in a free market.

          In your case, you've been voting for Mac since...well, I'm guessing a VERY long time. The fact that most voted for something else hasn't affected your ability to continue to vote for the product you favor.

          Anyway, just quibbling with the notion that "replacing a vote witha dollar" is less democratic. Free markets are vastly more democratic than any voting system in existence.
          John Carroll
          • MultiPlatformism

            I own and operate both competing platforms. Does this make
            my "vote" duplicitous? Am I a traitor to either by endorsing
            both with my dollar? Is the additional cost associated with an
            informed opinion somehow trumped by the flipped coin. Is
            the flipped coin a "choice"? Does the wealthy man become
            "more democratic" than the poor one because he can "vote
            more" in your particular "democracy". I'd urge you at this
            point to say yes, and say it enthusiastically. It will go into the
            Harry Bardal
        • Monopoly. Communism, Microsoft

          You don't vote for any of them, you just get used to them because they are there.

          The West, with it's I'll eat too much and watch DVD on my fat arse mentality is happy to be drip fed nonsense too. A whole society that cannot even eat the right amount of food.

          Working with each other, globally, will change everything for the better. It's just that the systems in place are all self-interested and will continuously elbow themselves into the way and call themselves "the progress". There is no bigger or better example of nothingness than Microsoft. All the time and money in the world an all they can come up with is Windows Vista, "chosen" by anti-competitive pre-installs that are VERY hard to avoid. Welcome to freedom.
          • Really?

            You can't find PCs that come with Linux preinstalled?

            Here, try this:

            Your problem, of course, is that you are trying to go to vendors who SPECIALIZE in Windows systems. That's like going to a Honda dealer to buy a Ford.
            John Carroll
          • Actually John...

            His problem is that he is zealot and an misinformed idiot.
          • Or just re-iterating a reality, in the face of otherwise false propaganda?

            But of course, does a blind from birth man know how it is to see?
            Do thick people know that they are thick?

            Just read the news man, it's all that you twits can deal with. You need to be fed what and how to think, and paid to do anything at all with your thoughts. That's you. Click click ;-)
        • Which do you fear more...

          ... a government with its police power or a company with its ability to sell products?

          Mario Monti picked Microsoft as his exemplar of an evil company, and he chose an organization a number of people were willing to consider villainous. Neelie Kroes has continued his policy of obtaining approval for anti-capitalist actions by choice of initial target.

          But Microsoft is not the only possible victim. Any company with a product selling well, defining well as low as 15% of the market, is vulnerable to hostile actions to prevent increased popularity.

          The greater problem is the abuse of government authority in service of an attitude opposed to commercial success. Fine Microsoft more $ billions, let every EU official, elected and unelected, live on filet mignon for a year. But don't let officious regulators treat the market as their own personal property.
          Anton Philidor
          • Same Message

            Thanks for those options, none are satisfactory.

            Democracy is based on equal representation. Every
            autonomous individual gets one vote. If you'd prefer a
            system in which representation is proportionate to wealth,
            you fly at it. If you feel the current system doesn't already
            skew in that direction, we'll agree to disagree. All civil and
            democratic nations have some kind of antitrust law, from Nanuvut to Zimbabwe, you might concede that most
            nations see these checks and balances as necessary. These
            courts have stricter rules of evidence than these forums,
            so a fantasy of what the EU are eating and for how long,
            for example, might not be accepted.

            These laws are designed to span generations, just as they
            are designed to compensate for the human failings of
            those that administer them. Somehow, I think your
            "solution" that consists of helium filled statistics, rhetoric,
            and fud, is not.

            Antitrust proceedings started in the USA. Was it a witch
            hunt here as well? Please do list all the other of our
            nation's laws you disagree with, and I'll tell you why equal
            representation is the single most important mechanism for
            their criticism and repeal.
            Harry Bardal
  • You mean Yuan not Yen

    Yen is Japanese currency, Yuan is Chinese...
    • Ack...

      ...I knew that, and wrote "Yen" anyway. This is why real journalists have editors.
      John Carroll
  • China has no (real) leg to stand on.

    You can only complain about monopoly practices and exhorbitant prices if you actually paid for the software. As noted, 244 people in China might have a case to make for being overcharged or whatever. The rest, well, we will see what China is after from MS in a week or two. I would liken this to the person who broke into your home, stole your clothes complaining to the DA that they don't fit right. :D

    • Interesting analogy TripleII

      but I'd go with MS broke into your home, said it was theirs and that you owed them money for it, and then you complain that this is wrong.
      • Was the Windows OS yours?

        Did Microsoft compel you to buy it? The notion that there aren't alternatives is simply not worthy of argument in 2008.
        John Carroll
      • Yes it is interesting...

        Because it is so apt.

        How can China claim harm to the Chinese consumer or industry when they steal the software anyway.

        By that accounting even if China did find Microsoft liable the damages award would only be enough to buy some raman noodles.