Europe's new 'monopoly' tariff on Microsoft bypasses WTO

Europe's new 'monopoly' tariff on Microsoft bypasses WTO

Summary: The European Commission has just levied a new $689,900,000 "fine" (read: tariff) on American software company Microsoft under the pretense of anti-trust which conveniently bypasses WTO agreements.  The Brussels based think tank Globalization Institute has published a paper (PDF) where it recommends a ban on OS (Operating System) bundling for all PCs sold in Europe.

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The European Commission has just levied a new $689,900,000 "fine" (read: tariff) on American software company Microsoft under the pretense of anti-trust which conveniently bypasses WTO agreements.  The Brussels based think tank Globalization Institute has published a paper (PDF) where it recommends a ban on OS (Operating System) bundling for all PCs sold in Europe.  At the end of the paper it writes:

Policy recommendation This paper’s recommendation is that the European Commission should require all desktop and laptop computers sold within the EU to be sold without operating systems.

Scott M. Fulton, III wrote an excellent news piece here where he covers the key issues and points of views and our own bloggers John Carroll and David Berlind weighed in on the issue.  Alex Williams of the Adam Smith Institute says "This neo-protectionist economic agenda is forming a policy cloak for the anti-Americanism of many European Commissioners, and it is European citizens who stand to suffer from it." and I agree with him.

The Globalization Institute says their recommendation will produce more "choice" but I can't possibly see how this would produce more choice when 90% of the population wants an Operating System (not necessarily Windows) bundled with their computer and they have no desire to install their own OS or pay someone to do it.  I can even agree on a matter of principle that computer makers should be forced to sell no-OS computers as an easy option for consumers or businesses though the savings won't be as big as some people think since hardware makers don't pay full OEM (Original Equipment Manufacturer) pricing or anything close to it.  But to tell European Consumers and they can't buy a computer with a heavily discounted pre-configured Operating Systems is asinine in my opinion and it is the absolute antithesis of choice.

When a PC maker bundles Windows Vista Home and sells the entire computer to the consumer at $350, does anyone think they pay $100 single-quantity OEM cost let alone the $199 retail price?  There's absolutely no way and I would venture to guess that the true cost of Windows Vista Home is in the vicinity of $60 because Microsoft sells at a significant quantity discount.  The computer comes with the OS and hardware qualified drivers integrated in to the system and everything works out of the box which is what 90% of the population wants.  Dell (and other PC makers) have started offering users the option of getting Linux bundled with the PCs because of MARKET demand but now some Bureaucrats in Brussels wants to tell Dell and others that this is now going to be against the law?

The last time the EC (European Commission) in their infinite wisdom decided to ban the bundling of software forced Microsoft to ship a version of Windows without Windows Media Player installed.  To the EC's consternation, no one bought that crippled version of Windows and they kept buying Windows.  Now some of these same people want to consider crippling PC companies and force them to sell worthless hunks of metal to people with no operating system installed and people will have to figure out how to install their own OS and device drivers or pay someone else to install it for them not to mention the additional cost of buying single-unit OEM OS.

The European Commission is frustrated that despite all their meddling these last few years, Microsoft has doubled their market share in the "Workgroup Server" market from 40% to 80% thought this is another one of those arbitrary definitions like the Apple iTunes monopoly definition.  When you factor in all those unregistered or roll-your-own copies of Linux running in the market place, you can hardly declare Microsoft a monopoly in the server space.  Within that narrowly defined market segment, perhaps the EC should consider the fact that people prefer paying $600 perpetual licenses for Windows Server plus a very occasional $250/incident support fee (typically 4 times a year for all Microsoft issues for my old company) over a $1300/year/server support contract for Red Hat Enterprise Linux.  Those tens of thousands of copies of Linux being run by Google and millions more by other companies don't count in the eyes of the EC when they need to define Microsoft a monopoly.

The EU Competition Competitor Neelie Kroes said that the EU now expects a "significant drop" in Microsoft's overwhelming market share.  In fact Kroes even hinted that perhaps somewhere around 50% but not exactly is the correct market share.  Kroes' spokesman Jonathan Todd clarified that:

"Once illegal abuse has been removed and competitors are free to compete on the merits, the logical consequence of that would be to expect Microsoft's market share to fall,"

So I can translate this (via the contrapositive rule of logic) that if the market share doesn't fall, then that "logically" must means that free competition doesn't yet exist and illegal abuse must still be rampant.  That leaves absolutely no other possible explanation for Microsoft's dominant market share so what's next if crippling PC makers doesn't work?  Will the EC then order ISVs (Independent Software Vendors) to port all of their applications to Linux with equivalent performance, functionality, stability, and validation if they wish to continue doing business in Europe?  Where does the madness end?

I have no doubt some people are jubilant about the fact that someone is sticking it to Microsoft, but do they honestly believe that an EC that tastes the fruit of their fines (tariffs) will stop with just Microsoft?  They've already declared Apple's iTunes a monopoly so what is to keep them from imposing a new WTO-bypassing tariff on Apple?  What happens when the EC declares Cisco a monopoly in routers because their market share is too big and not because they've actually broken any anti-trust laws?  Will the EC come up with all sorts of creative remedies to force Cisco to drop their market share to ~50%?  What happens when the EC declares Oracle a monopoly in their respective market?  Should Intel's market share be knocked down to ~50% too?

The American people and their politicians need to wake up to the fact that the EC is imposing tariffs under the guise of anti-trust merely on the basis of market share.  Europeans need to realize that their politicians are doing no favors for them with these draconian rules and that they will end up paying higher prices and greater hassles.  Trade is a two-way street and there will have to be repercussions and the side that has the trade surplus bleeds the most.

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Topics: Government, Banking, Software, Operating Systems, Open Source, Microsoft, Linux, Hardware, CXO, Windows

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  • Read the original PDF

    The original PDF makes some good provocative points. Given how simple it is to install an OS these days, usually only a few mouse clicks, I do not see a problem.
    icheyne
    • And you call that choice?

      Only option is a naked PC. If you don't like it, tough. Is that your idea of choice?
      georgeou
      • That doesn't stop the OEM installing the users choice

        AFTER they have decided which OS they want.
        deaf_e_kate
        • Re-read the PDF paper, especially the part about the ban.

          Re-read the PDF paper, especially the part about the ban.
          georgeou
          • I cant see anything about a ban, do you mean

            "Instead, we decided that the best way to approach
            competition was simply to insist that operating
            systems are purchased separately from desktop
            and laptop computers."

            i can't see any of their options stopping the OEM installing the purchased OS for the user. i'll have to print the b*gg*r out and read it
            deaf_e_kate
          • Sad

            "Policy recommendation
            This paper?s recommendation is that the European Commission should require all desktop and laptop computers sold within the EU to be sold without operating systems."
            georgeou
          • re:sad

            that does not stop the OEM selling an OS at the same time and installing it for the buyer.
            deaf_e_kate
          • So, Where's the ban.

            That doesn't say that the vendor can not sell the operating system to the customer at the same time or that the vendor can not install the operating system or other software.

            It should require that the OS and software installation carry a charge to be added to the sale, but it doesn't.

            Unload your Microsoft PR translator. He/she is wrong on this.
            Update victim
          • Sweet!!!

            This would stop so many problems that plague US customers.. at least someone wouldn't be forced to suffer the shortcommings of most PC manufacturers.... That whole mess that HP got into with not providing the software along with their prebumdled PCs and forcing customer to pay for a CD copy when it crashed thus forcing them to buy two coppies of windows... And then loose a class action lawsuit forcing them to send out thousands and thousands of CDs to customers who purchased HP systems. All that proprietary bios junk that corrupts PCs wiould be left off... All the worthless trial only, gonna expire in 3 days anyway junk software that no one needs and simply slows down the machine would be forced down consumers throats...

            Hell Yes!!!! Sell them all bare!!! Without a single piece of software installed... Apple included (let them buy the apple software seperate)... Software companies would probably lower their prices to circumvent piracy... but consumers would be forced to make a real decision.. And they would have to live with that decision... No one too dumb and lazy to learn how to install an OS could install one... unless they had the money to pay someone to do it for them.. The cost would be so high that it would motivate them into a basic computer class or to crack a book. We might actually have a society of people who knew more than how to "mash" that thar mouse tah git dat porn on duh intreynet.

            Users having the experience of the initial software load would be that more more prepared to deal with a reload in the future. No more all in wonder disks and reimage the PC... Let them load each piece of software they want. Force them to learn what it takes to configure it and get it working the way they want... Perhaps they will learn some "about gosh darn time" respect for the device that makes their lives easier and realize that it's their fault their computer keeps crashing...

            And lets start that experiement with those damn Europeans... and see if it works.. ROTFLMAO!!!!!
            i8thecat
          • to i8thecat: awesome

            I just about laughed myself into hysterics. Great post. I could have a decent side job installing software for people.

            I completely agree that there are way too many "dummies" out there using computers who need some remedial education. Many can't tell the difference between the monitor and the CPU. Almost all can't tell the difference between "the Internet" and the applications used to _access_ the Internet (Internet Explorer, FireFox, etc.). While I think the EU is being a bit heavy-handed, I don't think that it would be a bad idea to force users to install the OS for two reasons: it would force them to learn more about the PC and it would force OS makers to build better installers!

            I really have no love lost for Microsoft because I am convinced that they have abused their monopoly through uncompetitive practices. Levying fines is entirely appropriate for their continued abuses.
            blarman_z
          • No ban. And no mention that resellers can not sell install services.

            Only that the OS can not be bundled with the computer. Something I have been calling for for a decade! To bad the US doesn't have the same teeth.
            nomoremicrosoft
          • Hard to read when you have filters on

            "Policy recommendation
            This paper?s recommendation is that the European Commission should require all desktop and laptop computers sold within the EU to be sold without operating systems."
            georgeou
          • Sorry George

            you are the one trying to create an issue when there isn't one. i've replied to your "sad" reply to my earlier post that explains why.
            deaf_e_kate
          • AGREED, Please take yours off. (NT)

            .
            Update victim
          • As I do

            Unfortuantely, when I would buy new hardware, I had to pay for an OS and software which I would never use and blew everything away and loaded what I prefered. So I would agree w/ the Brussels think tank as long as the reseller of the hardware could also load whatever OS the customer would prefer.

            It would be interesting to see if Europe is going to be targeting Apple next or are they just on a Microsoft crusade.
            dwjunix
          • It Would include Apple.

            "Policy recommendation
            This paper?s recommendation is that the European Commission should require all desktop and laptop computers sold within the EU to be sold without operating systems."
            ShadeTree
          • Check it out in this country

            I decided to get a build to order computer. Most people that I contacted would not even let me order a build to order computer without installing Windows. They told me I was free to wipe it out after I got the computer but I would have to take Windows on the computer they built. Is that what you call choice?
            rhomp20029
          • Dealing with wrong people...

            But then again, I guess as long as you do not want a warrantee that would be fine with me. I build to order as per customer requests, how many empty boxes do you want.
            magpie_z
          • @ georgeou RE: BAN

            Georgeou did you read the whole pdf?
            AJ-Ubuntu-User
      • Choice?

        And you call a store full of OEM PC's that *shock* *horror* only come with Windows pre-installed choice do you? That isn't any choice at all. What if I already own a retail copy of an MS OS, why should I be forced to pay MS yet again when I walk into a store to buy a new PC?
        Bozzer