Open Source Blog

Matt Asay points to an article in the Wall Street Journal that is critical of the competition commission getting involved in placing a value on technology.

“Ms. Kroes's new assertion of power to assess innovation and to regulate its pricing should get the attention of businesses everywhere. When government officials feel comfortable second-guessing markets on such decisions, no business is safe and no property right secure,” writes Ronald Cass in the WSJ.

“It is troubling when a bureaucrat starts calculating the relative merits and associated value of technology. This is clearly a decision for the market. Apparently, however, the EU doesn't trust markets in the same way that the US does,” comments Asay.

While I agree that it would be better if the EC were not involved in putting a value in innovation, it strikes me that competition commissioner Neelie Kroes clearly feels the need to do this because it is the market that allowed Microsoft to abuse its dominance to illegally maintain a monopoly.

It’s a fine line that the commission has to tread, but it’s worth noting that the European proceedings are still at a relatively early stage. With Microsoft still appealing against the antitrust decision in general, Kroes appears to be trying to ensure that there are no loopholes that enable the company to avoid paying for its past misdemeanors.

Let it not be forgotten that Microsoft still holds a massively dominant position. Without a certain amount of regulation and hand holding, how can anyone be sure that the markets will address that position and ensure *fair* competition?

If you’re still not convinced that some sort of regulation is required, take a look at the latest joint status report from the United States vs Microsoft, which reveals that Microsoft is still finding communications protocols it should be sharing with rivals almost five years after it was ordered to do so.

“Plaintiffs… are particularly troubled that at this late hour in the program Microsoft is still discovering protocols that should have been included in the original documentation,” it states.

“Microsoft conducted an internal audit, including a review of Longhorn Server development, to determine whether additional protocols should be added to the MCPP documentation rewrite project… This latest audit identified ten new protocols that relate to the Longhorn Server product, which still is under development. The audit also identified ten additional protocols that are not new for Longhorn, but that Microsoft determined should be added to the MCPP and reflected in the rewritten documentation,” it adds.

Would market forces have encouraged the company to make those protocols available so long after the event?

While we’re on the subject of protocol licensing, it could be argued that the fact that Microsoft has signed up its first licensee for the EC Microsoft Work Group Server Protocol Program confirms the value of the protocols.

The licensee is Quest Software, Microsoft’s 2004 Global Independent Software Vendor (ISV) Partner of the Year which has an important role to play in ensuring interoperability, but is probably not the sort of vendor the EC was thinking when it ordered Microsoft to disclose information that would “enable rival vendors to develop products that can compete on a level playing field in the work group server operating system market.”

Quest said it intends to use the protocols to improve its capability to integrate Unix, Linux and Java authentication systems with Active Directory. These technologies were acquired in June 2005 along with Vintela, a company that Microsoft had invested in, and encouraged Quest to acquire.

In these circumstances, one wonders what interoperability information Microsoft might have hidden from Quest.

Why did the EC order Microsoft to disclose its protocols to rivals?

Because it had misused its monopoly position to illegally maintain a dominant position in the market.

In order to remedy that situation, the EC has an obligation to ensure that the interoperability information is available to everyone at a fair price.

In order to do this, in my view, it cannot leave the market to decide the value of Microsoft’s protocols (although a third party group could be argued for).

If the market on its own could set a fair value for these protocols, the European Commission could not be involved in this case in the first place.

Getting – finally – to the subject of open source. There is also a question about where you draw the line on restricting regulation. If the market should be left to decide the value of the innovation in Microsoft’s protocols, who or what should decide which companies Microsoft must share them with.

The company is already appealing the Commission’s view that it should be forced to share them with open source rivals. Left to market forces, Microsoft could and would continue to deny that information to rivals that use open source liceneses.

As I wrote over a year ago, should a company that has been found guilty of breaking European competition law be allowed to choose who benefits from the remedies against it?