The Strange, Strange World of Competition Law

According to economist, Dominick T. Armentano, author of Antitrust: the Case for Repeal, competition law has failed in its objectives and should be repealed. The Microsoft case is a classic example of competition law working against the consumer. Compete, but don’t win. Don’t make your products so attractive to consumers that 90 per cent buy from you and not from your competitors, as Microsoft does. Don’t add extra features to your products, at no extra charge, as Microsoft does. If you do, a group of bureaucrats who have never made anything in their lives can slap a 497 million euros (R3.75 billion) fine on you, as the European Commission did to Microsoft in 2004.

Not satisfied with unjustifiably taking a huge chunk of shareholders money from a company that has committed no crime, the bureaucrats who have never made anything in their lives, instruct the consumers’ favourite software supplier to stop adding those extra features that they find so popular, in this case the Media Player. After making such an anti-consumer ruling the EU’s Commissioner for Competition, Mario Monti, had the gall to release a statement that said: ‘In the end, I had to decide what was best for competition and consumers in Europe.’

How are we to understand this form of bureaucratic behaviour? As a consumer you note that the bureaucrats are out to get your favourite software supplier. Why? Because it makes software that you buy in preference to any other, and it throws in extra goodies at no extra charge. This is a terrible crime, right? You can’t spot the crime? Well don’t worry, most of us are as mystified as you are. They punish your supplier severely by imposing a fine that will pay the annual salaries, without perks, of 497 senior EU officials.

Why they chose 497, at one million euros each, and not 500 only they will know. Do you think they actually counted how many more bureaucrats they needed to go around trying to destroy businesses? Or did they need the cash to pay those nice kindly lawyers who are so concerned about consumer welfare that they charge astronomical fees to help with the hatchet job? Whatever they intend doing with it, you know as a customer that you share the sentiments of shareholders, you would much rather have that money in Microsoft’s bank account than in the bank accounts of bureaucrats that have never made anything in their lives, or their lawyers’. You would prefer having the money spent on new features to add to your software at no extra charge or have the lovable geeks dream up some fantastic new products for you.

But wait, that is not the end of the punishment to be meted out to your favourite software supplier. You have heard about copyright, haven’t you? This is the law that protects anyone that comes up with a new invention from having it copied by others. The purpose of the law is to encourage people to invent new things that can improve our lives. The theory is that if you spend a lot of time, energy and money inventing things and you get no benefit from it, you will stop inventing. Sounds logical, doesn’t it? Well, the EU Commissioners have come up with a brand new theory of their own about copyright and incentives. Their presumptive powers, they believe, allow them to brush aside copyright laws like veritable cobwebs.

Competitors will no longer have to try and steal Microsoft’s secrets. The Commissioners will do it for them, using the bludgeon of a dubious law that leaves all firms in the uneasy position of never knowing when their activities are to be considered illegal. If Bill Gates and his friends had software that allowed them to barely make a living, their copyright would have been safe and fully protected by the law. But because Microsoft is so ‘dominant’, get this, they were ordered to disclose ‘complete and accurate interface information which would allow rival vendors to interoperate with Windows, and to make that information available on reasonable terms’.

Microsoft has apparently not handed over all its secrets, only some of them, so the ‘rivals’ still can’t make their gadgets work with Windows. The competitors probably also wanted the information for free, or as close to free as possible. Did Microsoft perhaps have the temerity to suggest that ‘ on reasonable terms’ meant from their point of view as well as that of their competitors? Is that why the company was considered to be non-compliant? The competitors complained to the Commission, which slapped another fine of 280.5 million euros (R2.16 billion) on Microsoft for ‘non-compliance’ and threatened to impose another fine of 3 million euros (R23 million) per day if ‘non-compliance’ continued after 31 July 2006.

And so the bureaucrats who have never made anything in their lives set out to destroy the company that must be counted, at the turn of the millennium, as one of the greatest benefactors of mankind. The gift that Microsoft has given to the world is unique software that has made computers accessible to millions of people around the globe. Users of their software should protest this travesty of justice that is being perpetrated in the name of the European Union on the company that has given us all so much. They should question, not the competitiveness of Microsoft, but the injustice of these strange, strange competition laws that are being used in this act of persecution.

Author: Eustace Davie is a director of the Free Market Foundation. This article may be republished without prior consent but with acknowledgement to the author. The views expressed in the article are the author's and are not necessarily shared by the members of the Free Market Foundation.

FMF Feature Article/15 August 2006 - Policy Bulletin / 21 July 2009

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