Microsoft Might Under Microscope: Alternative Approaches to Antimonopoly Regulation

Abstract

In the increasingly flattening world described by Thomas Friedman, transnational corporations are commanding greater influence and control over the world’s resources. These transnational corporations account for approximately one third of the world’s output and seventy percent of world trade. The profit motive, combined with regulatory differences across countries, provides strategic incentives for transnational corporations to bypass restrictive regulations by placing their headquarters and business units in countries with relatively liberal laws. Thus, there is a growing need for regulation that spans national borders mirroring the markets it aims to regulate. In spite of the work that has been done to address problems created by transnational corporations, no magic solution has been found. For example, the United Nations Commission on Transnational Corporations was established in 1974 with a mandate to develop a code of conduct for transnational corporations. Work on the proposed code began in 1975 and a comprehensive draft was completed by 1990, but that draft has never been adopted. Similarly, the World Trade Organization (WTO) has been unable to reach a consensus regarding trade and competition policy. In an effort to illustrate substantive differences between international antitrust regimes and to illuminate the need for a transnational solution, this paper will present and analyze five antimonopoly suits brought in four different countries against the world's largest software company: Microsoft. The two United States (US) cases resulted in consent decrees requiring Microsoft to end its anticompetitive contractual practices and to hide its Internet browser. The European Union (EU) case resulted in Microsoft having to remove its media player from the Windows operating system (OS), disclose interoperability information, and pay a 613 million dollar fine. In Japan, the Japan Fair Trade Commission (JFTC) ordered Microsoft to terminate all non-assertion of patents provisions (NAP) in its license agreements. More recently, Korea ordered Microsoft to unbundle Windows Media Service from Windows Server OS, offer two versions of Windows PC OS: one without Windows Media Player and Windows Messenger and the other with user access to competitors’ products. These divergent results can be explained by the application of broadly similar antitrust laws applied differently by each country’s regime. For example, the European Commission’s ruling reveals a more aggressive approach to Microsoft's antitrust violations than does the United States’ decision. Korea’s ruling has been characterized as even more aggressive than the Commission’s. Although antitrust laws involve many aspects of competition policy including merger review, cartel enforcement, antimonopoly regulation, etc., the scope of the analysis in this paper is limited to Microsoft’s anticompetitive license agreements and anticompetitive tying practices. Thus, this article will examine the antitrust litigation Microsoft has faced in the US and Japan relating to its anticompetitive license agreements as well as the antitrust litigation in the US, E.U., and Korea regarding its anticompetitive tying practices to illustrate alternative antitrust regime responses to a perceived monopoly threat within the context of different regulatory environments. Analyzing these five antimonopoly suits against Microsoft allows meaningful comparison across countries within the limited scope of one company’s challenged anticompetitive business practices. Accordingly, the cases involving Microsoft’s anticompetitive contract provisions are discussed in Section II and the cases challenging Microsoft’s anticompetitive tying practices are discussed in Section III below. Section IV examines procedural and substantive differences across countries. Finally, alternative regime proposals are presented in Section V.