In reprimanding a company nearly a week before its own regulatory compliance deadline, the Competition Directorate General's arbitrary behavior stands far outside the norm, revealing a regulatory body whose process has strayed well away from needed transparency by plainly disregarding calls for due process and clear regulatory guidance from industry participants.
Regulatory decisions should be clear, consistent and fair in order to properly guide markets. A transparent process is key to reaching such guidance.
After the standard for Microsoft's documentation compliance became apparent (through an agreement between the commission, its trustee and the American company in spring 2006), all scheduled compliance deadlines have been met. Microsoft has made it clear that it fully expects to meet the recently revealed compliance hurdles by Tuesday, the last of the agreed-upon deadlines.
Yet the commission issued its staggering fines for "non-compliance" almost a full week before the agreed deadline.
With this capricious action, the commission jeopardizes its ability to impartially regulate the information and computing technology industry in the European Union. Potential market leaders in Europe now rightfully ask how they can know the rules of the road when the regulatory authority articulates the guidelines only as a "we know it when we see it" standard. The answer is, we can't. No set of clear rules presently exist except for those gifted with regulatory clairvoyance.
Throughout the commission's opaque process, it has never been able to identify quantifiable consumer harm. On the contrary, evidence provided to regulators and the court, as well as anecdotal market data, strongly suggests that both the markets for Media Player and server technologies actually thrive. Much to the commission's chagrin, consumers and competitors have reaped tremendous benefits wholly independent of the commission's policing authority. That complex, technological markets can flourish without European Commission intervention causes the regulatory body immense consternation. Thankfully, it has had little or no role to play in the design of IT products to meet consumer demand.
That is, up until now.
There can be nothing more invasive and disruptive than the imposition of arbitrary and irreversible rules that seek to "level the playing field" for "harmed" competitors through mandated, government design of market-leading products, as well as forced expropriation of highly valued intellectual property given freely to risk-averse, multinational "competitor" corporations.
Legitimate, innovative companies will avoid risk and the zealous hunt for innovation where they see regulatory quicksand, as witnessed here by the commission's latest fines.
Should the commission's regulatory hubris remain unchecked, its appetite will know no bounds. In other words, competitors who seek gain from the commission's amorphous process may themselves find their companies in the unfortunate position of being a market leader, caught within the crosshairs of commission jurisdiction.
We hope "knowing it when we see it" does not become the new commission rulebook, but we fear that the impulse to regulate in this manner will prove too lucrative to commission officials and others who cannot control the fast-paced dynamics of competitive markets.
This latest action by the European Commission is greatly disheartening. The precedent, which the commission seeks to inflict on the digital market, will undoubtedly be to the detriment of European consumers as well as the European ICT industry.
Hugo Lueders is European public-policy director for the Computing Technology Industry Association. Microsoft is a member of the trade group.
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