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EU vs. Microsoft: The morning after

The European Union has won. Unfortunately, Microsoft may not be the only one that loses in the judgment.

Yesterday, it seemed like a great thing that Microsoft got swatted by the European Union on antitrust grounds. Today, questions are emerging. The Wall Street Journal has two good articles that deal with the fallout from the ruling. Unfortunately, Microsoft may not be the only one that loses in the judgment.

The first article by Charles Forelle calls out the nebulous standard that may be set by the ruling. Namely, if you win (in the market), you may lose (in court):

Microsoft's backers said the ruling will stifle innovation by making it tougher to design products with new features. Some lawyers raised the specter of a regulatory nightmare as technology companies struggle to adapt to differing standards across the globe.

"If I were a leading company in any sector, I'd be really concerned about this," said Ted Henneberry, an antitrust lawyer at Heller Ehrman LLP in London who wasn't involved in the Microsoft case.

Chipmakers Intel Corp. and Rambus Inc. are among the U.S. companies that may be affected as antitrust regulators in Brussels are emboldened by the ruling. The European Union brought a case against Intel in July, accusing it of using marketing incentives to deter customers from dealing with rival Advanced Micro Devices Inc. The EU is investigating Rambus over alleged manipulation of standard-setting bodies to assure itself of patent royalties...

The U.S. Justice Department's chief, Thomas Barnett, contrasted Europe's approach with America's. He said that in the U.S., even dominant firms "are encouraged to compete vigorously," while Europe's stance may end up "harming consumers by chilling innovation."

Maybe. I think the biggest threat is to treat any successful company as a de facto monopolist. This is simply not the case. But the temptation will be there to think this way, as the WSJ notes:

The European court's ruling marks "a giant step backward" for consumers and businesses worldwide. While U.S. antitrust law has been increasingly interpreted to protect consumers rather than competitors...Europe's law has always had a strand that shields less successful firms from dominant rivals. "Yesterday's decision weaves a whole tapestry from that strand," Mr. Cass writes. "It condemns dominant firms that bundle new features into their products if those features could be supplied independently by other firms--even though bundling is a common way for all firms, dominant or not, to improve their products."

Maybe the EU gets involved with Red Hat to help Novell/Suse against it because Red Hat dominates its market. Or maybe MySQL gets booted because it has market share over PostgreSQL. Silly? Perhaps. But without clear guidelines for interpreting the court's findings, being big suddenly becomes bad.

I'm glad to see Microsoft reined in. I'm a little concerned about what the European court will do with its newfound confidence.