The European Commission to act against Microsoft? Forget it

If anyone needed to be convinced that the U.S. antitrust
system is irretrievably broken, they now have the needed evidence.
After acknowledging that Microsoft was both a monopoly and acted in a
predatory fashion, the U.S. appeals court threw out the remedy. The European
press is railing against the ineffectiveness of U.S. antitrust law. Some think that this is a
good time for the European Commission and its high-profile competition
commissioner, Mario Monti, to take the action that the U.S. courts were
unable or unwilling to do.

(Editor’s note: Here’s a related column about international business law from July 5.) The European Commission seems to think it has jurisdiction. The
Commission has opened up investigations into both Intel and
Microsoft. The Commission has shown it has the power to interfere
with U.S. businesses. It exercised that power over a pair of U.S. corporations
this past week. It successfully slapped
down a merger between General Electric and Honeywell despite the
fact that neither company was based in Europe and despite the fact there are
several quite capable competitors based in Europe who might have been
inconvenienced but certainly not devastated by a GE-Honeywell link-up.

If the Commission could act against a politically connected defense
contractor like GE, chaired by Jack Welch, one of the most popular
businessmen in the world, why wouldn’t it do the same against Microsoft? Unlike in
the United States, many Europeans have taken a dim view of Microsoft and Bill Gates.
Any actions against the company by the Commission would likely be seen by the European
public as an overdue blow against rapacious American business tactics.

The Commission will have have plenty of reasons to claim
jurisdiction. Any legal remedies to the Microsoft case that are generated by U.S.
courts would have to be put into effect around the world. That would almost
certainly include changes to licenses and to contractual relationships on a
worldwide scale. If the EU’s regulatory bureaucrats want an excuse to intervene,
they’ll have one, and they won’t need to wait until there is a final
settlement in order to act.

In addition, there’s some evidence that commercial treaty law gives
the Commission whatever authority it might need in this case. For example,
the World Trade Organization’s
Agreement on Trade-Related Aspects of Intellectual Property Rights
(TRIPS) may be technically obsolete in many places, but the language concerning
“Control
of Anti-Competitive Practices in Contractual Licenses” seems pretty
clear. The degree to which language aimed at curbing competitive abuses
created by government licenses could be extended to licenses created by
corporations is an open question, but it is certainly an appropriate
question for a multinational organization such as the European Union to bring up, and to act
on.

It’s also unclear just how much the United States would protest if the EU beat
up on the company. When the Commission acted against two leading
American companies, and major military contractors at that — companies with ties to key
Republicans — the silence was deafening. If two well-connected U.S. companies could be
derailed by the Europeans with few objections, how loudly would the United States
object if the Europeans took on a company that American officials were
already litigating against (if, perhaps, a little half-heartedly)?

Part of the lack of any U.S. response can be traced to the fact that
relatively few Bush appointees have been confirmed and the policy-making pecking
order hasn’t been fully worked out among those who are in place. To be fair,
there hasn’t been much talk about international cooperation to deal
with the issue of monopolies since Joel
Klein left the U.S. Department of Justice. In fact, not much
intellectual energy has been expended concerning international monopolies since 1999, when the U.S. State Department last determined a policy
concerning international antitrust issues. Today that policy, like
all other Clinton-era policies, is “under review,” but in the interim,
key intellectual-property and antitrust decisions are being made by
second- or third-tier bureaucrats, to the extent that those issues are being decided at
all. In such an environment, the European Commission may feel far more
free to act than it otherwise would.

For all of that, it’s still unlikely that the EU will really do
much.

For one thing, the motives of the European Commission have been a
little fuzzy in the past. The Commission’s rulings have been frequently
criticized for paying far greater attention to connections of powerful,
well-connected corporations than the details of any legal theories concerning the
nature of competition. When the GE/Honeywell merger came up, there was plenty
of subtle and not-so-subtle lobbying of the Commission by politically
connected companies such as BAE Systems and Airbus Industrie.

There’s no equivalent consortium among European software developers.
The complaints against Microsoft have been pressed by U.S. companies such
as Advanced Micro Devices and Sun Microsystems, rather than European
firms. In addition, several prominent cable firms, as well as influential
companies such as Ericcsson, KPMG and Cap Gemini, have formed important strategic relationships with Microsoft, including several joint ventures. That alone
makes cynics confident that the Commission will do little more that hold
hearings and make threats.