Perspective: Europe: United in regulation

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.

Biography
George A. Pieler is senior research fellow at the Institute for Policy Innovation.

More Perspectives

[carsten_schmidt]

the problem is not with europe but with microsoft

I guess these days anybody can become a scholar, expert or
whatever. But to blame the EU on this (especially with stupid
remarks like "a political union that can't draft a successful
constitution" -- as a reminder dear scholar the EU was able to
draft the constitution it was the people who voted on it that
didn't approve it. Few constitutions around the globe would
survive a vote by the people) is ridiculous. Microsoft knows the
rules and they broke them. If they don't meet the demands that
were presented to them they have to pay a fine, simple as that.
What the EU is doing with the money, who cares. It is not about
what the EU does with the money it is about Microsoft's
behavior. Plus the EU has low productivity? Give me a break. How
do you think they can stay competitive with having much higher
wages and higher additional costs? Only because they are
actually more productive than most of their low cost
competitors.

[patrokov]

Don't quibble

Perhaps George should have qualified that can't draft a constitution comment with "can't draft a constitution THAT ANYONE CAN READ." George is right. The EC IS in fact extorting money out of Microsoft, and for the most dubious reasons.

[carsten_schmidt]

the problem is not with europe but with microsoft

I guess these days anybody can become a scholar, expert or
whatever. But to blame the EU on this (especially with stupid
remarks like "a political union that can't draft a successful
constitution" -- as a reminder dear scholar the EU was able to
draft the constitution it was the people who voted on it that
didn't approve it. Few constitutions around the globe would
survive a vote by the people) is ridiculous. Microsoft knows the
rules and they broke them. If they don't meet the demands that
were presented to them they have to pay a fine, simple as that.
What the EU is doing with the money, who cares. It is not about
what the EU does with the money it is about Microsoft's
behavior. Plus the EU has low productivity? Give me a break. How
do you think they can stay competitive with having much higher
wages and higher additional costs? Only because they are
actually more productive than most of their low cost
competitors.

[patrokov]

Don't quibble

Perhaps George should have qualified that can't draft a constitution comment with "can't draft a constitution THAT ANYONE CAN READ." George is right. The EC IS in fact extorting money out of Microsoft, and for the most dubious reasons.

[taphilo]

A Matter of Perspective

Europe has a different view of what is allowed when compared to a US idea. This has always been the case. Pick any time since the founding of the USA and look what the norms were in the US vs. Europe as a whole for a variety types of business and social ideas, or even nation by nation, and they are rarely the same.

Europe is ruled by more regulations than the US. The EU in Brussels adds yet another layer of rules over top of nation rules.

If someone created a program that was suddenly "must have" everywhere, and that person refused to let people see the code so others could tap into it unless they paid a $50,000 fee each year - the EU would step in and force that person to give away the code - and the inventor lose that those fees since to the EU reasons it is for "the better good" that a person - company - should sacrifice for the good of society. The US would say they wrote it, they own it, and if people want to use it must pay the fee. Only when it becomes "an un-reasonable" burden, or excessive to value, does the US step in and say no. Maybe that $50,000 should really be $50.

Now if you were that individual who invented the program, in the US you would still get reasonable fees and be happy, in the EU your work is now given away to other to use for the social good - and you have to live on that income - 0.

A good test is to put yourself as if you were a single person owning that invention: would you mind being forced to give away your invention and living on handouts from others?

Europe has not always been this social minded. Long periods of time there were the rich, then everyone else. Now, they take as much money from the rich as possible to feed the ever increasing needs of social programs to ensure the masses do not rise up in a new revolution. And it is much easier to tax someone who lives elsewhere and receives no benefits so to pay for those who do live there.

This is like income taxing a person from Washington State who works in Oregon yet the Washington person has no say in how the taxes are spent, nor are they allowed to get any benefits from Oregon at all since they do not living there. (I think city of Washington D.C. does this too.)

This is what the EU sees many foreign companies as: a regulatory cash cow.

[taphilo]

A Matter of Perspective

Europe has a different view of what is allowed when compared to a US idea. This has always been the case. Pick any time since the founding of the USA and look what the norms were in the US vs. Europe as a whole for a variety types of business and social ideas, or even nation by nation, and they are rarely the same.

Europe is ruled by more regulations than the US. The EU in Brussels adds yet another layer of rules over top of nation rules.

If someone created a program that was suddenly "must have" everywhere, and that person refused to let people see the code so others could tap into it unless they paid a $50,000 fee each year - the EU would step in and force that person to give away the code - and the inventor lose that those fees since to the EU reasons it is for "the better good" that a person - company - should sacrifice for the good of society. The US would say they wrote it, they own it, and if people want to use it must pay the fee. Only when it becomes "an un-reasonable" burden, or excessive to value, does the US step in and say no. Maybe that $50,000 should really be $50.

Now if you were that individual who invented the program, in the US you would still get reasonable fees and be happy, in the EU your work is now given away to other to use for the social good - and you have to live on that income - 0.

A good test is to put yourself as if you were a single person owning that invention: would you mind being forced to give away your invention and living on handouts from others?

Europe has not always been this social minded. Long periods of time there were the rich, then everyone else. Now, they take as much money from the rich as possible to feed the ever increasing needs of social programs to ensure the masses do not rise up in a new revolution. And it is much easier to tax someone who lives elsewhere and receives no benefits so to pay for those who do live there.

This is like income taxing a person from Washington State who works in Oregon yet the Washington person has no say in how the taxes are spent, nor are they allowed to get any benefits from Oregon at all since they do not living there. (I think city of Washington D.C. does this too.)

This is what the EU sees many foreign companies as: a regulatory cash cow.

Weak article

This article is a funny read. First thing one should understand is that the European nations and the US indeed have in some points different value systems. But to connect this fact to the Microsoft case (especially in the way the author did) means being blind for the real reasons.

#1
Microsoft today holds a de-facto monopoly of operating system and office application market.

#2
Bundling more and more software together with the core operating system (where Microsoft hold a monopoly) gives a real disadvantage to competitors offering similiar but unbundled products

#3
Using a monopoly to throw competitors out of the market hurts the market in the long term.

Simple. And not new. What happened to Standard Oil in the early 20th century, or AT&T in the seventies? That was all in the US. And it happened for a good reason.

If in todays world the US does not see the similiarity of Microsofts monopoly in the software market, then it might be good if Europe takes the leadership in creating a fair marketplace for software companies.

This is not an issue of the U.S. vs. Europe, this is an issue of fair business practices vs. a monopolist.

Weak article

This article is a funny read. First thing one should understand is that the European nations and the US indeed have in some points different value systems. But to connect this fact to the Microsoft case (especially in the way the author did) means being blind for the real reasons.

#1
Microsoft today holds a de-facto monopoly of operating system and office application market.

#2
Bundling more and more software together with the core operating system (where Microsoft hold a monopoly) gives a real disadvantage to competitors offering similiar but unbundled products

#3
Using a monopoly to throw competitors out of the market hurts the market in the long term.

Simple. And not new. What happened to Standard Oil in the early 20th century, or AT&T in the seventies? That was all in the US. And it happened for a good reason.

If in todays world the US does not see the similiarity of Microsofts monopoly in the software market, then it might be good if Europe takes the leadership in creating a fair marketplace for software companies.

This is not an issue of the U.S. vs. Europe, this is an issue of fair business practices vs. a monopolist.

2+2=5 in the homeland of creationism and ID

Germany is the first exporter of the world whereas the USA import 50% more more than they export.
There may be different explanations of this gap, but writing in these conditions that Europe is not competitive is just a confirmation that 2+2=5 in the homeland of creationism and ID. When I was younger, we used to laugh about the stalinist theory of Lyssenko, but the stalinism produced only one Lyssenko and the nazis produced only one Goebbels. The genius of the contemporary USA is to produce millions of Lyssenko and Goebbels per day ... It's indeed the only thing that this totalitarian country is able to produce competitively.

[Richard K Forester]

Goebbels?

Surely you aren't comparing modern American industry to the efficient serial killer engine that was the Nazi regime in your apparent favorite country of Germany.

2+2=5 in the homeland of creationism and ID

Germany is the first exporter of the world whereas the USA import 50% more more than they export.
There may be different explanations of this gap, but writing in these conditions that Europe is not competitive is just a confirmation that 2+2=5 in the homeland of creationism and ID. When I was younger, we used to laugh about the stalinist theory of Lyssenko, but the stalinism produced only one Lyssenko and the nazis produced only one Goebbels. The genius of the contemporary USA is to produce millions of Lyssenko and Goebbels per day ... It's indeed the only thing that this totalitarian country is able to produce competitively.

[Richard K Forester]

Goebbels?

Surely you aren't comparing modern American industry to the efficient serial killer engine that was the Nazi regime in your apparent favorite country of Germany.

[gvc2031]

Come on, George...

don't be so unbiased and fair. Tell us what you really feel.

[gvc2031]

Come on, George...

don't be so unbiased and fair. Tell us what you really feel.

Microsoft does not help improving health that much

While MS provides a lot of money, it is not well placed, and as with aid to poor countries in general, is tied to all sorts of problems, such as promoting technology rather than looking at root political causes, being tied into lots of conditionalities, etc.

Philanthropy is good, no doubt, but being so heavily dependent on it is a sign of greater problems.

Europe and USA have a lot to improve. They are both quite stingy in their aid. Well below what they PROMISED. Most of their pledges are reported in the media, yet what they actually deliver is usually far less, or actually taken out of already promised amounts.

The author seems to follow that ideology of Europe bad, America good; Europe not as innovative, etc. In part that is true, but when talking about the plight of the third world, that is not really as relevant, as projection of American and European power onto third world problems is significant, even if the two blocs differ on a few technicalities.

I wish third world coverage and mention actually contained representative perspectives of the third world.

Microsoft does not help improving health that much

While MS provides a lot of money, it is not well placed, and as with aid to poor countries in general, is tied to all sorts of problems, such as promoting technology rather than looking at root political causes, being tied into lots of conditionalities, etc.

Philanthropy is good, no doubt, but being so heavily dependent on it is a sign of greater problems.

Europe and USA have a lot to improve. They are both quite stingy in their aid. Well below what they PROMISED. Most of their pledges are reported in the media, yet what they actually deliver is usually far less, or actually taken out of already promised amounts.

The author seems to follow that ideology of Europe bad, America good; Europe not as innovative, etc. In part that is true, but when talking about the plight of the third world, that is not really as relevant, as projection of American and European power onto third world problems is significant, even if the two blocs differ on a few technicalities.

I wish third world coverage and mention actually contained representative perspectives of the third world.

lacking balance and perspective.

A lot of what you say about the EU being over regulated is true, however talk of a vendetta is absurd. Lets not forget that "so far" it has only been the EU that has offered any effective censure to the monopolistic abuses being commited by Microsoft. I say so far because I suspect that MS are no less powerful at lobbying here than they are in the US (see for instance their efforts on software patents).

To speak of European leaders as you do massively over simplifies what is a complex balance between national governments, appointed officials (commission) and national/EA MPs.

When it comes to who is "extorting money" the first thing that comes to my mind is the billions of pounds of UK taxpayers money that end up on MS coffers resulting from a desktop monopoly.

lacking balance and perspective.

A lot of what you say about the EU being over regulated is true, however talk of a vendetta is absurd. Lets not forget that "so far" it has only been the EU that has offered any effective censure to the monopolistic abuses being commited by Microsoft. I say so far because I suspect that MS are no less powerful at lobbying here than they are in the US (see for instance their efforts on software patents).

To speak of European leaders as you do massively over simplifies what is a complex balance between national governments, appointed officials (commission) and national/EA MPs.

When it comes to who is "extorting money" the first thing that comes to my mind is the billions of pounds of UK taxpayers money that end up on MS coffers resulting from a desktop monopoly.

[Earl Benser]

Among his other flagrant faults...

.. Ol' George seems to be rather stupid about the core issue with
Microsoft. Microsoft has absolutely no plans to "sell Windows in
Europe decoupled from its Internet Explorer browser". In fact,
the MS marketing tactics left much of the core Windows code in
IE, so that if you didn't install IE, your Windows wouldn't run
correctly. So every one had to install IE, and then there was no
need for the Windows user to consider Netscape.

Now if George really had a clue about the subject he wishes to
expound, he would have quite familiar with the extraction of
Windwos Media Player from Windows to get the European
version. BUt somehow, I don't think that George has any interest
in accuracy. Soap boxing is much more fun when you can invent
your cause,

[Earl Benser]

Among his other flagrant faults...

.. Ol' George seems to be rather stupid about the core issue with
Microsoft. Microsoft has absolutely no plans to "sell Windows in
Europe decoupled from its Internet Explorer browser". In fact,
the MS marketing tactics left much of the core Windows code in
IE, so that if you didn't install IE, your Windows wouldn't run
correctly. So every one had to install IE, and then there was no
need for the Windows user to consider Netscape.

Now if George really had a clue about the subject he wishes to
expound, he would have quite familiar with the extraction of
Windwos Media Player from Windows to get the European
version. BUt somehow, I don't think that George has any interest
in accuracy. Soap boxing is much more fun when you can invent
your cause,

polarized?

there seems to be a near-religious pro-con divide on Microsoft. Facts: there's no market for Explorer-free Windows in Europe. NYTimes N. Kristoff call Gates Found. among most effective in Africa. Europe has not prospered by fighting over last year's tech instead of creating next generation.

polarized?

there seems to be a near-religious pro-con divide on Microsoft. Facts: there's no market for Explorer-free Windows in Europe. NYTimes N. Kristoff call Gates Found. among most effective in Africa. Europe has not prospered by fighting over last year's tech instead of creating next generation.