TCS Daily


The Code War

By Tiziano Buzzacchera - February 24, 2006 12:00 AM

The persecution of Microsoft by the EU continues unabated. The software giant, after being hit with a €497 million fine from then-EU Competition Commissioner Mario Monti in 2004, is now accused of not doing enough to ensure software interoperability among its competitors. According to EU antitrust authorities, Microsoft didn't publish "complete and accurate" documents concerning its interface so that rivals could get full interoperability with Microsoft operating systems. The company replied that all the documents the European Commission had demanded were delivered on time and that it complied with all the obligations.

It is important to remember that this litigation has emerged because of the alleged "near monopoly" of Microsoft, which, according to Monti, exploited "bundling" in order to eliminate competition in the operating systems market. As a consequence, the Commission imposed the conveyance of information to rivals, to restore "fair" competition.

But measures present many problems. First of all, it is not "fair" at all to force a company to hand over information about its products, particularly in a delicate sector such as software and computers. It represents a clear violation of property rights and, furthermore, an abuse of Microsoft's commercial secrets. All of this, of course, reduces the motivation to do research and saps industrial incentives to innovation. Corporations like Microsoft owe their success to a leading capability in guessing and satisfying the needs of consumers; but, to do this, it is necessary to keep up with or even surpass the times -- that is, to create new products -- which means innovation and research. Industrial research requires money, which won't probably be invested if the entrepreneur is aware of the fact that his competitors, thanks to willing bureaucrats, have the same information at their disposal and can develop a similar product. So, the destruction of capital is the first negative consequence of such a provision.

Second, there's no guarantee the antitrust action will achieve its stated purpose. It is true that, as the press release of the European Commission states, the 2004 decision did not impose the sharing of the Windows source code. But it is doubtful that a simple surrender of interfaces will "enable rival vendors to develop products that can compete on a level playing field in the work group server operating system market". What about Mac OS X? What about Linux or Unix? There are already other good interfaces, even if Microsoft is still prominent in this sector.

Believing that the distribution of interfaces will allow rivals to defeat Microsoft is nothing more than wishful thinking. Entrepreneurial success does not depend simply on equality of opportunities; it rests on individual alertness and on the development of ideas. What will the Commission do if this new "level playing field" does not result in a distribution of market share to its liking?

The Microsoft case demonstrates once again that antitrust policy is often nothing more than "corporate welfare" or, more precisely, "losers' welfare". Its legislation pushes enterprises to look for help from the state and to win on markets through lawyers and lobbyists rather than through scientists and experts.

Tiziano Buzzacchera's writings have appeared in several Italian newspapers, including L'Indipendente, Il Domenicale and Ideazione

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2 Comments

If I were Bill Gates...
If I were Bill Gates, I would discontinue all sales to EU countries, put restrictions in the EULAs against running any Microsoft programs (even the free ones) inside any EU country. Then I'd tell all the lawyers of the EU that they can keep 90% of anything they get in the EU for filing laws suits on behalf of Microsoft for copyright violations.

On the second thought, I'd just buy a small EU country, elect myself to the EU Parliament and get the rules changed.

Fair is the straw man
"First of all, it is not "fair" at all to force a company to hand over information about its products, particularly in a delicate sector such as software and computers."

I don't know about fair, but when you say information you need to be specific. The code interface is the specific information in question and it is a contract.

Something every programmer knows, regardless of the language they write is that the highest crime a programmer can commit is not to document the interface that other programmers need to use if the software is meant to be used by others. By definition, an operating system is used by ALL other programs.

In days gone by (pre-microsoft) hardware manufacturers provided an operating system with their hardware and extensive documentation specifying every call to the operating system. They would have been ashamed to do any less. Just because the o/s is now sold separate from the h/w does not make the behavior of a company desiring a monopoly on all applications any less shameful.

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