The Real Enemy :
Bureaucrats, Not Microsoft
The true foe of
free competition is not Microsoft, but the EU bureaucrats attacking it
in the name of competition.
Valentin Petkantchin
Issue XCVIII- May 1, 2007
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Sales of Vista, Microsoft's new
operating system, appear to be exceeding forecasts.
Meanwhile, Brussels is ramping up its test of
strength with the software giant.
Under the pretext of protecting
competition, and following record fines of several
hundred million euros and a requirement to disclose
strategic information to its competitors, the
European Commission is moving toward controls on the
prices of this information. Although some
competitors may gain, in reality these measures all
go against the principle of free competition and
against consumers.
Despite the additional time granted to Microsoft
(the company had until 23 April to respond to
Brussels's Statement of Objections), the
commission's readiness to influence the prices of
interoperability interfaces embodies a number of
perverse direct effects.
First of all, in a framework of free
competition, it is consumers who end up deciding if
a product or service is sufficiently innovative by
choosing whether or not to buy it. In this
particular instance, commission technocrats have
taken it on themselves to decide that the
information provided by Microsoft "does not contain
significant innovations." Letting the commission
issue decrees in this matter does nothing to promote
free competition.
Furthermore, with free competition relying
inextricably on respect for the property rights of
parties in the market and on free negotiation of
prices, the commission is clearly on the attack here
as well. After fabricating an artificial "market" in
information on the interoperability of the Windows
operating system, something that might certainly
have remained a commercial secret, the commission is
being drawn inescapably into seeking to control
their prices as well.
But the real danger comes, indirectly, from an
unrealistic vision of competition, based on market
share, that pushed the commission into condemning
Microsoft initially for "abuse of dominant position"
in operating systems. It also accuses the company of
using this "position" to attack other niches in the
software market and hampering competition.
From an economic standpoint, the intensity of
competition should not be measured by market share,
as the commission has done. The fact that a company
such as Microsoft equips the great majority of PCs
around the world does not mean competition is
somehow threatened or diminished.
Unless competitive entry is blocked by law,
competition may come not only from existing
operating systems but also from potential
competitors joining the fray, drawn by the
opportunity to serve consumers better and thereby
make a profit.
Even if the market shares of competing operating
systems are very low today, nothing stops consumers
who find Windows unsatisfactory from turning to
competing products. It is certainly feasible to opt
for Apple's operating system by buying one of its
computers. It is also possible to put together one's
own computer, or have an independent professional do
so, and equip it free of charge with the Linux
operating system. Companies such as Red Hat or SUSE
specialize in the sale of complete Linux-based
packages, with extras such as technical assistance,
enabling computers owned by businesses and
individuals alike to run on Linux.
If there were truly a demand for options other than
the Microsoft operating system, companies would not
hesitate to specialize in meeting this demand. On
the contrary, if Microsoft retains a "dominant
position," it is because it offers today's best
alternative in consumers' eyes.
But competition can also come from new players.
Although merely a potential constraint, this is just
as real for Microsoft as the existence of direct
competitors. For instance, what would prevent Intel,
the number-one maker of microprocessors, from
competing against Microsoft in operating systems,
just as Microsoft could one day decide to build its
own computer from scratch – including a processor in
competition with Intel – and to be the only firm
selling machines running on Windows?
Contrary to what one may be inclined to think
initially, this sort of competition may already be
starting to emerge. For example, Red Hat and Intel
just announced that they are linking up to help the
latter's reseller partners "with rapid entry into
the expanding Linux marketplace with Red Hat's
comprehensive portfolio of solutions and new ways to
provide their customers with more value".
In this context, the antitrust authorities in
Brussels – with their tendency to punish companies
overwhelmingly favored by consumers – may
paradoxically stifle competition. Their policy can
only induce Intel to hold back on moves to advance
projects that challenge Microsoft's
"quasi-monopoly," should the opportunity arise to
provide greater consumer satisfaction. Does the
commission not already have Intel in its sights
because of another presumed "abuse of dominant
position" with its 80% world market share in
processors?
The commission's relentless attitude toward
Microsoft may artificially protect some current
competitors, but not competition as such. When there
are no legal barriers to entry, consumers can stand
up on their own and choose the companies that best
meet their needs. Microsoft is constantly subjected
to the market test and must continuously win
consumer confidence. Free competition needs to be
protected, not against Microsoft but rather against
Brussels.
Valentin Petkantchin is a researcher with
the Molinari Economic Institute (Institut
Économique Molinari). |
This TRA feature has been edited in accordance with
TRA’s
Statement of Policy.
Click
here to return to TRA's Issue XCVIII Index.
Learn about Mr. Stolyarov's
novel, Eden against the Colossus, here.
Read
Mr. Stolyarov's new comprehensive treatise,
A Rational Cosmology, explicating such terms
as the universe, matter, space, time, sound, light,
life, consciousness, and volition, at
http://www.geocities.com/rational_argumentator/rc.html.
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