January 31, 2004

The Economist on the EU Antitrust Investigation [6:59 pm]

Sir Bill and his dragons—past, present and future

The latest document bolsters these claims. It uses new evidence from updated market shares to illustrate how Microsoft’s server and media-player have advanced at the expense of rivals. Compared with the drama of the American antitrust action, which included an infamous videotaped deposition from Mr Gates and evidence culled from internal Microsoft e-mails, this is dull stuff. But it does confirm that Microsoft is exploiting its desktop dominance in workgroup server software; and that, by “tying” WMP to Windows, it has overtaken its chief rival in the media-player market, RealNetworks.

Particularly damning are the comments from providers of media content. They say that the cost of supporting different media formats (when providing video clips on a website, for example) leads to a “winner takes all” market which it is difficult for a new media-player, no matter how innovative, to enter. The argument that the efficiencies derived from incorporating WMP into Windows outweigh the anti-competitive effects is dismissed. The commission tellingly observes that the incorporation of WMP in Windows “sends signals which deter innovation” in any technologies which Microsoft could conceivably tie with Windows in the future.

[...] If no agreement is reached, however, and the expected negative ruling is issued, probably in March, Microsoft will appeal. The case will go first to the Court of First Instance in Luxembourg and then (assuming Microsoft loses again) it would move to the European Court of Justice. But all that would take years. Microsoft’s enthusiasm for some kind of early settlement to insulate it from further antitrust action is influenced by the appearance of a third dragon on its horizon. For the firm is currently gearing up for a battle with a new and vigorous competitor: Google.

Slashdot discussion: A Look at Microsoft’s Regulatory Problems

See also: The Coming Search Wars

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