Microsoft and the EU: Busted Trust

Is the European Union more willing to encourage competition than the United States?

April 22, 2002

Is the European Union more willing to encourage competition than the United States?

Europeans have found themselves on a roller coaster lately when it comes to dealing with the United States on strategic business issues. One of the areas where this topsy-turvy relationship is most visible is in the antitrust arena.

It is fair to say that Europeans were even more shell-shocked than Microsoft’s U.S. competitors back in November 2001, when the Bush Administration decided to let the software giant gently off the antitrust hook.

The deal between the U.S. Department of Justice and Microsoft fell far short of the restrictions and punitive measures that many expected to be imposed on a company that previously had been found guilty of preserving a monopoly.

Prior to the terrorist attacks on September 11, Europeans would never have believed that U.S. policymakers would cite geopolitical considerations as an antitrust defense. But that is precisely what is now being discussed in Europe as a leading explanation for the U.S. government’s sudden willingness to settle the case with Microsoft.

At a time when the country came under attack from abroad, the U.S. government apparently decided to forget that its nation’s courts ruled that Microsoft attempted to preserve its own monopoly.

The war against terrorism is, in many ways, a war that is being waged with information. Policymakers in the United States reason that Microsoft is a major source of U.S. software power — and a strategic asset.

Europe, on the other hand, has taken a much different approach to the software giant. The European Commission’s investigation has focused on a number of potentially anti-competitive Microsoft tactics — including a linkage of media players in its operating system software.

The Commission also refused Microsoft’s call to emulate the U.S. Justice Department’s actions — and simply settle the case. Lurking in the background, of course, is the strong record in dealing with U.S. companies, which has already been established by the EU competition authorities.

The aborted GE-Honeywell merger, for instance, was an indication that Europe is acting tougher than the United States on competition issues and antitrust law. It’s quite a change.

This represents quite a turn of events. Consider that critics in the United States over the years have established a proud record of taking the Europeans to task, often with good cause. They complained about Europe’s lack of economic dynamism — and the role that a lack of real competition played in such stagnation.

Now that Europe is taking competition seriously, it appears to have touched a few raw nerves in the United States.

Critics of the EU’s approach toward Microsoft claim that Europe should concentrate on protecting consumers — and not merely shield potentially inefficient competitors. That goal, say these critics, is the primary focus of U.S. antitrust law.

Indeed, that may be a reasonable argument. But to many Europeans — even those with a great deal of admiration for the U.S. economic system — the distinction seems just a little too fine. Is the issue really the nature of antitrust law — or an over-reaction to the fact that somebody other than the United States has become more aggressive in its enforcement?

Add to the mix European concerns about potential U.S. imperialism through electronics (see tomorrow’s Global Bite “Microsoft and the EU: Breaking the Code”) — not to mention the “geopolitical exception” for Microsoft explained above — and you’ve got a recipe for continued conflict between Europeans and Americans.

Ultimately, it comes down to this: If the United States is suddenly softening its antitrust stance for a homegrown global heavyweight, even more pressure will be exerted on Brussels to go the opposite way — and close some Windows at the same time.