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The Sept. 17 decision by the European Court of First Instance to force Microsoft to license certain Windows proprietary technology and intellectual property rights to competitors may ultimately hurt consumers, according to the U.S. Department of Justice.
Thomas O. Barnett, the DOJs point man on antitrust matters, said in a statement issued Sept. 17 that while the Courts complex, 238-page decision will take some time to fully understand, his initial reaction is it will slow innovation and competition by U.S. technology companies.
Barnetts comments underscore what appears to be a growing difference between the United States and Europe over antitrust law. In deciding European consumers were harmed by Microsofts behavior, the European Court, or CFI, upheld a 2004 European Commission ruling that Microsoft abused its dominant position by refusing to make its products interoperable with those of its rivals.
The Court also said consumers were harmed by Microsofts decision to tie Windows Media Player to the Windows operating system. Barnett questioned the Courts standard for unilateral conduct by a company.
“U.S. courts recognize the potential benefits to consumers when a company, including a dominant company, makes unilateral business decisions, for example, to add features to its popular products or license its intellectual property to rivals, or to refuse to do so,” he said. “In the United States, the antitrust laws are enforced to protect consumers by protecting competition, not competitors.”
Click here to read more about the EU ruling.
The DOJ is not unfamiliar with Microsofts business practices. In 1998, the DOJ filed an antitrust complaint against Microsoft, alleging the Redmond, Wash., software maker had restrained competition in violation of U.S. antitrust laws through exclusionary conduct.
The case primarily centered on Microsofts conduct to stop the competitive threat posed by the Netscape Navigator Internet browser, Sun Microsystems Java platform and similar middleware. After the DOJ prevailed in court, Microsoft settled. Part of the settlement prohibits Microsoft from using exclusive contracts that inhibit competition and requires Microsoft to provide interoperability information to rivals.
“We are…concerned that the standard applied to unilateral conduct by the CFI, rather than helping consumers, may have the unfortunate consequence of harming consumers by chilling innovation and discouraging competition,” Barnett said.
Under U.S. law, absent demonstrable consumer harm, he said, “All companies, including dominant firms, are encouraged to compete vigorously.”
At least two U.S. lawmakers agreed with Barnett.
“Deeply troubling” is how Rep. Robert Wexler, D-Fla., chairman of the Subcommittee on Europe in the House Committee on Foreign Affairs, characterized the Court ruling. Wexler said the decision sets a dangerous precedent and will have a dramatic impact on U.S.-EU economic relations.
“I am concerned that American high-tech companies, including Microsoft, are being unfairly targeted by zealous European Commission regulators. It would be disastrous if the Courts decision against Microsoft leads to a deluge of new anti-trust cases in Brussels, which appears to already be starting,” Wexler said in a statement. “I am convinced that this will embolden the Commission to go after other U.S. technology companies, such as Intel, Apple and Qualcomm.”
Wexler called the European Courts decision “protectionism, under the guise of antitrust policy. Americas market leaders should not be punished for innovation—especially when they create markets that never existed before.”
Rep. Dave Reichert, R-Wash., echoed Wexlers comments in a statement issued shortly after the Court issued its decision.
“This ruling sets a dangerous precedent that says Europe is closed for business to those companies who invest the capital and resources necessary to lead a market,” he said. “I would urge successful companies that do business in Europe, as well as the many small partners who work with those companies, to ask themselves this key question: Who will be the next Microsoft? Will Intel? Will Qualcomm? Will you?”
Wexler urged the Bush administration to “send the strongest possible message to European officials that is unacceptable for the EU to supersede U.S. court decisions and dictate global market share, or to use antitrust and standards laws to slam the door on American technology companies.”
The DOJs Barnett said the United States “looks forward” to continuing discussions with the EU over antitrust matters and the difference of interpretations between the two.
“This cooperation is particularly important given the global nature of many markets, including in the high technology sector,” he said. “The Justice Department will work with the [European Commission] to develop sound antitrust enforcement policies that benefit consumers on both sides of the Atlantic.”
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