Jerry Yang may have a dysfunctional relationship with Carl Icahn, but he can take comfort knowing that Europe's top regulator is making Microsoft equally miserable.
The ever-entertaining Neelie Kroes, who is the European Union's competition commissioner, again poked her finger in Steve Ballmer's eye. Earlier this week, she encouraged EU member countries to break their reliance on a single software supplier. (Guess who she had in mind?)
Neelie Kroes: It'll take a lot more than flowers from Steve Ballmer.
(Credit: European Union)"I know a smart business decision when I see one--choosing open standards is a very smart business decision indeed," said in a speech. "No citizen or company should be forced or encouraged to choose a closed technology over an open one."
As Loren Feldman's sock puppet sendup of Shel Israel is wont to say, "Fascinating!"
Obviously, the decision to go open source or proprietary comes down to customer preference. But when a powerful European regulator starts picking sides--if not taking on the unofficial role of technology cheerleader--Microsoft must be wondering whether it will ever get a break.
The company has already racked up more fines than any other company in the history of European antitrust enforcement. Earlier this year, the EU hit Microsoft with a $1.3 billion penalty for failing to comply with a 2004 antitrust ruling and for charging "unreasonable" prices to rivals seeking documentation for workgroup servers. In recent months, however, Microsoft has pushed a charm offensive. But whatever thaw it had with Kroes has proved short-lived.
"There were couple times Ballmer came out beaming from meetings (with Kroes) thinking they had ironed out remaining issues. But Europe's a different animal," said Michael Cusumano, a professor at the Massachusetts Institute of Technology's Sloan School of Management. "It's the place where the open-source movement originated and they don't really have any dominant infrastructure players. Their history is that Europe's market has been fractured across different countries with different laws."
(Credit:
Dan Farber/CNET News.com)
And no doubt Microsoft is a very different type of company than the sort Europeans have had to deal with. Even though they may have relationships that are cordial on a personal level, Microsoft views its market as global and reserves the right to create linkages among its different products. In the U.S., we understand that a bit more, but rightly or not, Europeans feel they've been victimized.
That's why Microsoft has been saying the right things about open source in public. In March, the company's chief counsel, Brad Smith, told a crowd of open-source developers that Microsoft believes "in a bridge that is scalable, that is workable, that is affordable...that's a hard bridge to build. But I will say this--today more than ever--that is a bridge we very much need to build." A couple of months earlier, Microsoft also pledged not to sue open-source developers for products that connect to Microsoft software and would share communication protocols governing how its software products communicate.
That hasn't made any impression in Brussels. Kroes publicly encouraged both the Dutch Parliament and government to further embrace open standards. Meanwhile, EU regulators are investigating whether Microsoft's guilty of improper competitive practices around Internet Explorer as well as any barriers rivals face making their products interoperate with Office.
Microsoft's Jason Matusow recently had a interesting post explaining why he believed technology mandates didn't make for good public policy.
Technology providers want their current and future technologies considered on the merits of the technology and the value those technologies bring to those who choose to consume it. If a government mandates a specific technology and/or class of technologies, they are unnecessarily restricting their own choices. Inevitably statute moves more slowly than technology, and mandates subsequently lead to sub-optimal choices.
He has a point. Unfortunately for Microsoft, the company's in a permanent bind. It can try to accommodate to open standards but it will not adopt open source as a primary standard. And that means Microsoft is always going to run into an impasse with Kroes or other like-minded overseas regulators.
"I think there is common ground," Cusumano said. "They just haven't found it yet."
I can understand why Steve Ballmer may be wondering if he'll ever catch a break from Neelie Kroes.
Europe's top regulator
And no matter how much Ballmer coos about turning the page and being a good corporate citizen, the Old World's regulatory mandarins still distrust Microsoft. Take a listen to the recording of Kroes' news conference. At one point it sounds as if she's talking about her experience with a used car salesman.
"I can remember four times when, if you were naïve, you could have thought everything was fixed. This didn't seem to be the reality. They have to deliver and implement."
You have to wonder whether the EU also plans to erect a roadblock in the way of a Microsoft-Yahoo merger--that is, of course, assuming Microsoft ever clinches a deal. What's clear is that Microsoft's burden of proof is going to be substantially higher on the other side of the Atlantic than it will be in Washington. The perception that the EU and the U.S. have divergent philosophies when it comes to antitrust policy is close to the reality. I should hasten to add that not everyone shares that view. In fact, Kroes' predecessor, Mario Monti, argues just the opposite:
"A single, but highly publicized case of divergence, has contributed to spread this perception. But if you look at the record, you will find that nothing could be further from the truth. Put simply, the EU and U.S. agree on what competition policy should be all about. We share a common fundamental vision of the role and limitations of public intervention. We both agree that the ultimate purpose of our respective intervention in the market-place should be to ensure that consumer welfare is not harmed."
"Some of that may be media exaggeration but there also is substance to the depiction. In general, European antitrust law focuses more heavily on monopolists' effects on competing businesses rather than on consumers."
We'll see.
When Microsoft last week announced changes designed to guarantee better technological interoperability with rivals' products, the EU responded tersely and, well, rather coldly. Ballmer extended an olive branch, hoping that the Europeans might interpret the move as a sign Microsoft was ready to be more open and yes, play by the rules. Kroes' office was unmoved.
By now, Brad Smith, who directs Microsoft's legal strategy, probably could write a book on the differences between European and U.S. trustbusters. On the other side of the pond, the prime concern is to maintain viable competition and Europe's antitrust focus cares more about any monopolistic effects on rival businesses, rather than on consumers.
And they're not afraid to hold up a big red stop sign. In 2001, U.S. regulators signed off on General Electric's proposed merger with Honeywell International. The EU's Competition Bureau, then run by Monti, nixed the deal. He said the combination would have reduced competition in the aerospace industry and resulted in higher prices for customers, particularly airlines.
That does not mean Microsoft's pursuit of Yahoo is bound to come a cropper once Kroes' team gets a chance to review any such deal. In an interview with my colleague Ina Fried on Tuesday, Ballmer was noncommittal: "I think regulators will look at that in all appropriate jurisdictions and I'm sure they'll give us a fair shake in all appropriate jurisdictions."
Considering Microsoft's fractious history with the EU, can Microsoft's CEO safely bet on this being a sure thing? I wouldn't take that bet.
"And next time, don't forget to eat your vegetables--or else!"
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The Academy Awards show is over and done with, but European Competition Commissioner Neelie Kroes is making a strong bid to win an Oscar as "Best Supporting Scold."
The EU's regulatory czar has socked Microsoft with an 899 million euro ($1.35 billion) fine for failing to comply with a March 2004 antitrust ruling and for charging "unreasonable" prices to rivals seeking documentation for workgroup servers. In the statement from the European Union, Kroes singled out Microsoft as the first company in the last half-century of EU regulation fined for failing to comply with an antitrust mandate:
"I hope that today's Decision closes a dark chapter in Microsoft's record of non-compliance with the Commission's March 2004 Decision and that the principles confirmed by the Court of First Instance ruling of September 2007 will govern Microsoft's future conduct."
Steve Ballmer's not looking to reprise the role of industry bully. Remember the blowback after his "the hell with Janet Reno" yowl in the late 1990s? He will write the check and order his legions to move on.
Neelie Kroes
(Credit: European Community)There's not enough upside to fight Kroes over what, for Redmond at least, is essentially chump change. Besides, he's anxious to gain EU goodwill for Microsoft's pledge last week to open up its APIs and protocols. The idea was to foster the impression that Microsoft was trying to be more open and not impede rivals seeking to make their products more compatible.
And, of course, to get Kroes off its back.
The EU is within its rights to wield a big stick. Whether this really was necessary is another story. While U.S. regulators took a powder when the Bush team took over the Justice Department, European trustbusters remained aggressive and actually forced changes in Microsoft's behavior (or at least got Redmond's braintrust to sign off on paper).
But pouring salt on the wound--and that's what it is--doesn't change anything on the ground. Microsoft's already paid big fines, and so now it will pay another one. Kroes made her point for the cameras and guaranteed a boatload of press attention over the next 24 hours.
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