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Europe: United in regulation

Policy analyst George Pieler says spat between European trustbusters and Microsoft speaks volumes about what's wrong with EC antitrust policy.

The road to a blissful united Europe may be strewn with constitutional pitfalls, but the members of the European Commission are unwavering in their collective commitment to outregulating the United States and Asia. Despite Microsoft's payment of massive fines to the EC in compliance with Europe's antitrust decree against the software giant, and its moves to sell Windows in Europe decoupled from its Internet Explorer browser (Europe says that nasty "bundling" of software is anticompetitive), the EC's antitrust officials continue to hold Microsoft in de facto "regulatory receivership."

First, EC officials didn't like Microsoft's marketing approach for the stripped-down Windows version. Then it didn't like the company's approach to disclosing key elements of its software to competitors. And then, EC Competition Commissioner Neelie Kroes complained that Microsoft was stalling on its compliance with the Commission's antitrust order.

Earlier this month the EC and Microsoft appeared to have an agreement on compliance that would avert Kroes' threat to impose an additional $5 million-a-day fine on Microsoft. Apparently European antitrust enforcement has great potential to be "the gift that keeps on giving" to fill the coffers of Europe's bureaucracy.

The EC's antitrust officials continue to hold Microsoft in de facto regulatory receivership.

If Europe's aggressive stance on the fine print of Microsoft's compliance seems a bit presumptuous for a political union that can't draft a successful constitution, think again.

Taxes and regulations are in many respects the financial glue that holds the European project together. Interestingly enough, while the EC member nations continue to wrangle over the proper management of their budgetary obligations, EC President Jose Manuel Barroso announced that "we at the Commission are thinking of an idea that I find very interesting, and that is the funds from fines imposed on companies that break competition rules could go to development aid."

Barroso linked his announcement to the coalition called "Global Call to Action Against Poverty," which includes among its projects Bob Geldof's July 2 Live 8 fund-raising concert. (Yes, U2's Bono is heavily into this as well).

Barroso didn't mention Microsoft, the most heavily fined company in history under Europe's competition rules. But the writing is on the wall: Microsoft (and other multinational companies, especially American ones) is a reliable cash cow for Europe, and what better way to cement Microsoft into Europe's budget process than to link Microsoft's fines to a nebulous anti-poverty crusade?

Assuming Barroso's plan is implemented, activists can complain that any shortfall in Microsoft's payments to Europe are taking food out of the mouths of starving children in sub-Saharan Africa.

Microsoft can of course handle its own public relations, and indeed Chairman Bill Gates has been rather aggressive in donating time and money to the cause of improving health and economic well-being in Africa. But this cynical ploy by Europe's leader makes clear that Europe wants to market itself as the great "regulatory leveler" between the developed world and the developing nations. That does not bode well for American enterprises doing business in Europe (even enterprises that don't much like Microsoft).

Europe seems destined to grow its government bureaucracy faster than its economic base.
Because Europe's low productivity, high taxes and abundant regulations continue to put it at a disadvantage internationally, it can only increase its power in the world by extorting money from elsewhere: from the U.S. government if possible, and from U.S. companies for certain.

If Europe would only unleash its own free market, its entrepreneurs and innovators could provide the wherewithal to support the continent's geopolitical goals. Instead Europe seems destined to grow its government bureaucracy faster than its economic base. That's too bad, because Europe's neglect of economic fundamentals, and failure to comprehend the power of economic freedom, cost the entire world the wealth Europeans can create.

That doesn't hurt Microsoft, which can afford to deal with any number of regulatory idiocies. It does hurt everyone else, and particularly the hard-pressed citizens of the developing world, who need more markets for the goods and services (as well as a heavy dose of that same economic freedom).

It is indeed ironic that Europe's vendetta against leading American companies undermines the very cause Barroso claims to espouse: raising the Third World out of poverty. Maybe Geldof can talk Barroso into singing a different tune at the next aid concert.