Microsoft Hoist by its Own Anti-Anti-Competitive Petard


One of the decisive moments in computing history was when Microsoft was investigated for and found guilty of breaching US rules on anti-competitive behaviour.

Microsoft's line in defending itself was that it was not anti-competitive, that this investigation was all down to desperate, failed competitors trying to take their petty revenge by setting the government on the company, and that it should be allowed to “innovate”, untrammelled by those silly governmental authorities that just don't understand all this groovy technology stuff.

That played very well in certain constituencies, but was a risky strategy, because it created what was in effect a huge ticking time-bomb, just waiting to blow up in Microsoft's face. It has now exploded, as a recent posting on Microsoft's legal and policy site makes clear:

Government competition agencies are increasingly focused on Google’s growing power in search and online advertising. The U.S. Federal Trade Commission, the U.S. Department of Justice and the European Commission have all determined that Google is dominant in certain markets, including search advertising. In late 2008 the DOJ was prepared to go to court to block Google’s attempt to partner with its largest search rival, Yahoo!. Last year the DOJ told a federal court that Google’s book search plan is anticompetitive in several respects. (One big problem is that Google would help itself to essentially exclusive rights to tens of millions of books—effectively locking out everyone else.)

Last week the DOJ reiterated that view in court, even after Google had an opportunity to address the DOJ’s concerns. This week came news that the European Commission is investigating various aspects of Google’s conduct, including claims of retaliation, exclusivity and manipulation of search results to disadvantage rivals. The European Commission is likely to treat these cases quite seriously, given that Google’s share of search and search advertising is north of 95% in many European countries.

The big problem, of course, is that what is sauce for the goose, is sauce for the gander: if Microsoft argued forcefully against being investigated for anti-competitive practices because it was "successful" and “innovative”, surely Google can too? What makes this argument even stronger is the fact that one of the companies complaining about Google here is actually owned by Microsoft.

Of course, Microsoft's lawyers are not stupid, and they are well aware of the extremely close parallels here. So they have tried to pre-empt precisely this criticism with their own “explanation” of why things are actually jolly different in this case:

search is so central to how people navigate the Internet, and ... advertising is the main monetization mechanism for a wide range of Web sites and Web services. Both search and online advertising are increasingly controlled by a single firm, Google. That can be a problem because Google’s business is helped along by significant network effects (just like the PC operating system business).

Hang on - Microsoft is *admitting* that network effects play an important part in the PC operating system business? – which is largely why the GNU/Linux desktop just can't get a foothold, despite its quality. Helpfully, Microsoft goes on to dig itself into an even deeper hole:

These and other network effects make it hard for competing search engines to catch up. Microsoft’s well-received Bing search engine is addressing this challenge by offering innovations in areas that are less dependent on volume.

But Bing needs to gain volume too, in order to increase the relevance of search results for less common search terms. That is why Microsoft and Yahoo! are combining their search volumes. And that is why we are concerned about Google business practices that tend to lock in publishers and advertisers and make it harder for Microsoft to gain search volume.

I really can't believe my eyes: Microsoft is complaining about *lock-in*, and how unfair that is when Google allegedly practices it. Of course, those clever lawyers are once again only too aware of how ridiculous this is coming from the company that has practised lock-in more successfully than anyone else in the history of computing, so they try another quick deflective action:

Microsoft would obviously be among the first to say that leading firms should not be punished for their success. Nor should firms be punished just because a particular business practice may harm a rival—competition on the merits can do that, too. That is a position that Microsoft has long espoused, and we’re sticking to it.

But then they seem to realise that they have gone too far in defending successful companies, which lets Google off the hook, and so desperately try to backtrack:

Our concerns relate only to Google practices that tend to lock in business partners and content (like Google Books) and exclude competitors, thereby undermining competition more broadly. Ultimately the competition law agencies will have to decide whether or not Google’s practices should be seen as illegal.

A bit like Microsoft's own practices that “tend to lock in business partners and content...and exclude competitors, thereby undermining competition more broadly” you mean? Oh dear, this one could be fun....

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