Gorillas and antitrust regulators

When a company loses an appeal of a negative antitrust ruling, how do they satisfy regulators whose strides have suddenly been lengthened by the stamp of approval handed down by an upper level court? If Microsoft's recent decision is any guide, they do whatever the hell that regulator tells them to do.

Headlining the latest twist in the case is a rather dramatic reduction in fees for protocols licensed under the EC program, from the 5.95% of revenue Microsoft previously proposed for commercial users down to 0.4%. This licensing fee includes the right to use patents related to the licensed protocols.

Free software products (basically, anything covered by a GPL license) can't use patented IP, a restriction GPL developers impose on themselves, but one the EC considers important. To satisfy their needs, therefore, a new "patent-free" license is available for the low low price of €10,000 (a flat, up-front fee). This gives developers of open source products the freedom to attempt to work around those patents or, more dramatically, pose a challenge to their validity in court, without having to risk deferring the use of a Microsoft protocol until the case is resolved (though they would still have to forego use of the patent, at least until their challenge was successful).

Pretty big concessions on Microsoft's part, which is why I found it funny that Neelie Kroes felt it necessary to explain that this was NOT a settlement, and that the EC did not back down on any of its demands. How anyone could view this outcome as working to Microsoft's advantage is beyond me.

Even so, I am not dissatisfied with this outcome, given that I suggested this past April that Microsoft would do itself a world of good by giving its protocols away, thus expanding the market for its technology into areas that Microsoft could never manage on its own. That led me to make some rather pointed suggestions to people higher than me at Microsoft (which is most people) suggesting that Microsoft try to make a grand bargain with the EC that would include dropping the appeal with the Court of First Instance (which seems like a rather good idea from hindsight).

Given the uncertainty surrounding the court case, it seemed to me that what should matter most to Microsoft was NOT the protocol documentation and licensing rules, but the right to include whatever they want into Windows. Just as car companies have the right to include car stereos in their own cars, and home builders the right to supply their own windows and doors (thus depriving third-party door makers of a large market for direct-to-consumer doors), Microsoft has the right to offer a product that offers a large set of integrated features, however advanced they choose to make those features. Microsoft should have as much of a right to ship a version of Windows with Media Player, Internet Explorer and Windows Messenger installed as Apple has to ship a product with QuickTime, Safari and iChat installed.

Abandoning the appeal while agreeing to long-term control over release of documentation related to interoperability and ensuring replaceability (which, to my mind, is what the EC should really care about) seemed like a fair trade...if they got the right to control WHAT went into Windows.

Oh well.

That antitrust ruling WILL have ramifications far beyond Microsoft. Google is finding that EC regulators fresh from their triump over Microsoft are going to make very difficult - if not impossible - its merger with DoubleClick. That, too, I consider to be a bit silly. Whatever Microsoft management might think, I think Google has every right to merge with whomever they darn well please...including DoubleClick. If Internet marketing grows too costly, it's not like alternative channels don't exist (and Microsoft has a rather large one of its own), and besides, profits attract competition. Those high prices would serve as great cover for competitors (including Microsoft) to say "hey, stop paying those extortionary Google marketing fees."

That's the way competitive markets are supposed to work. It seems a bit odd to protect one big company from another out of a mistaken notion that regulators must shape markets like sculpters at a pottery collective.