We all know about the overwhelming supremacy of proprietary software in the desktop market. But not everybody knows that some steps have been taken to try to limit it, in favour of a more fair competition among vendors, and between the proprietary and free software worlds. A key player in assuring that the markets are not artificially biased is the European Commission for Competition. In this article, I review the cases it brought against Microsoft Corporation, with particular attention to the one concerning the bundling of the Internet Explorer web browser to the Windows operating system. The latter resulted in European customers of Windows being prompted a screen from which they can install the browser of their choice.

Introduction

In our global economy, competition is the watchdog of the market and the fuel for research and development of new technologies. Moore's law, stating that "the number of transistors that can be placed inexpensively on an integrated circuit doubles approximately every two years"[19], would not hold true were not for the healthy competition among chip manufacturers. In the same way, markets suffering from poor competition experience slow progress, as in the web browser market in the early 1990s until Mozilla started the browser renaissance.

Competition is the watchdog of the market and the fuel for research and development

Under the enlightened guide of Commissioner Neelie Kroes, followed in office by Commissioner Joaquin Almunia, the European Commission took pioneering steps in defending competition in the market and preventing it to become a feud of dominant companies. In the next section I will summarise the story of competition cases against Microsoft, which ultimately lead to the "ballot screen" that allows millions of Europeans to freely choose their web browser.

Microsoft abuse of dominant position

In the European Union, as elsewhere around the world, Microsoft Windows holds a dominant position in the personal computer operating system market. According to StatCounter, in July 2011, the different Windows ﬂavours combined to a 91% market share in Europe[16], as can be seen in ﬁgure 1.

Figure 1: Market share of operating systems in Europe in July 2011, from [16].

Certainly the software giant from Redmond, Washington, has invested huge capitals in research and development of desktop software, but it is quite arguable that that alone could justify such a prominence in the market. Network effects can lead a company to dominate over its competitors, especially when there is a time advantage in reaching a market (for instance, see [17]). However it is well documented that Microsoft Windows gained at least part of its overwhelming market share through unlawful practices.

Microsoft has been accused of abusing its dominant position multiple times, both in Europe and elsewhere, resulting in some of the highest ﬁnes ever handed out by any court[18]. In 1993-1994, following a complaint by Novell Inc., Microsoft was found guilty of anti-competitive behaviour by requiring manufacturers to pay a Windows license for each computer sold, regardless of whether or not it carried Windows on board[1]. In 1998 Sun Microsystems argued that Microsoft was not disclosing key information needed to achieve interoperability of Windows NT with concurrent systems and programs. Following this complaint, the EU further investigated the way in which streaming technologies were being integrated in Windows[14].

In 2003 the European Union ordered Microsoft to offer a version of Windows without Windows Media Player bundled to it, so as to open the market to competing media player software. In 2004 the European Commission stated that Microsoft's practise "constitutes by its nature a very serious infringement" of European Treaties and added a ﬁne for €497.2 million[6]. Additional sentences followed this decision due to Microsoft appeals and to its limited compliance to the 2004 sentence. These led the EC to ﬁne Microsoft for €280.5 million in 2006[7] and €899 million in 2008[12].

The EC fined Microsoft for over €1.5 billion

Microsoft's views about competition can be understood by taking a look at its 2008 annual report[8]:

The European Commission closely scrutinizes the design of high-volume Microsoft products and the terms on which we make certain technologies used in these products, such as ﬁle formats, programming interfaces, and protocols, available to other companies. In 2004, the Commission ordered us to create new versions of Windows that do not include certain multimedia technologies and to provide our competitors with specifications for how to implement certain proprietary Windows communications protocols in their own products. [...] The availability of licenses related to protocols and ﬁle formats may enable competitors to develop software products that better mimic the functionality of our own products which could result in decreased sales of our products.

A company producing such a statement has clearly not understood why it was condemned to pay over a billion Euros in ﬁnes: it is an implicit admission of their awareness of the abuses over competing companies.

Browserchoice.eu

In more recent years, Microsoft fell once more under the eye of the EC. In January 2008, in fact, following a complaint by Opera Software ASA, the Norwegian vendor of the Opera Browser, the Commission opened an investigation on the "tying of separate software products" in the Windows operating system. More specifically[4]:

Microsoft is alleged to have engaged in illegal tying of its Internet Explorer product to its dominant Windows operating system. [Opera's] complaint alleges that there is ongoing competitive harm from Microsoft's practices, in particular in view of new proprietary technologies that Microsoft has allegedly introduced in its browser that would reduce compatibility with open internet standards, and therefore hinder competition. [...] The Commission's investigation will therefore focus on allegations that a range of products have been unlawfully tied to sales of Microsoft's dominant operating system.

The investigation resulted on the EC sending a Statement of Objections[*] to Microsoft in January 2009, stating that "Microsoft's tying of its web browser Internet Explorer to its dominant client PC operating system Windows infringes the EC Treaty rules on abuse of a dominant position", further detailing that such practise "harms competition between web browsers, undermines product innovation and ultimately reduces consumer choice". A Commission's memorandum reports that the investigation produced evidence that the tying of Internet Explorer to Windows "distorts competition" among web browsers by giving IE "an artiﬁcial distribution advantage which other web browsers are unable to match"[3].

In response, and despite the statement of objections is not a verdict of infringement but a mere communication of suspected wrongdoing, Microsoft proposed to stop bundling its web browser on Windows 7 N, the version of the operating system to be sold in Europe[10, 9]. At the same time, "Microsoft committed to make available for ﬁve years in the European Economic Area a 'Choice Screen' enabling users of Windows XP, Windows Vista and Windows 7 to choose in an informed and unbiased manner which web browser(s) they want to install in addition to, or instead of, Microsoft's web browser"[5]. You can see a screenshot of the Choice Screen in ﬁgure 2 and on the web at the address browserchoice.eu.

Figure 2: A screenshot of the ﬁrst page of the ballot screen.

According to European treaties, the commitments became legally binding at the end of 2009[2]. In a memorandum of March 2010[5], the EC welcomed the agreement with Microsoft, expecting the solution to "ensure competition on the merits and allow consumers to beneﬁt from technical developments and innovation" and claiming that the ballot screen "will be displayed on over 100 million personal computers (PCs) in Europe between [March] and mid-May". Commissioner Almunia stated that browser choice "should also boost the use of open web standards which is critical for the further development of an open internet".

Ballot screen aftermath

Did the ballot screen really help? Answers from different sources greatly vary and go from a plain "it's useless" to enthusiastic "downloads tripled".

Only about a week after the initial roll-out, the New York Times reported that Mozilla Firefox had about 50000 downloads via direct links on the browser choice page, while Opera Software claimed downloads from some European Countries tripled. Still in the same article, "Microsoft said it was too early to tell whether the choice screen might prompt signiﬁcant numbers of users to change", and "Fenrir, the Japanese company that developed Sleipnir, said Fenrir had seen an increase in downloads in recent days as a result of the choice screen"[15]. Of the opposite opinion is Neowin, claiming that "no browser really beneﬁts" from the ballot screen, citing data from StatCounter indicating that there is a narrow 1% gap between European and global trends[13].

It's consumers that win simply by the fact they are provided a choice

For the sake of completeness, I must admit that, after taking a look at the data from StatCounter myself, I deemed it too difficult to draw any conclusions, as the trends are biased by effects such as new releases of browsers and operating systems (for instance, Safari is bundled to any Apple device, and Windows ships with IE virtually everywhere outside of Europe). Another factor that makes extremely hard to analyse the data is the unusual high rate of adoption of Google's Chrome. In the end, to say it with Mozilla's words, with which I fully agree, "it's the consumers that win simply by the fact they are provided a choice"[11].

Conclusions

The European Commission has taken huge steps forward in addressing the issue of poor competition in the European Common market in the ﬁeld of information technology: the case against Microsoft is just one of the many the Commission for Competition has addressed.

The ballot screen for web browser has been an excellent way to settle the dispute between Brussels and Redmond about the tying of Internet Explorer with Windows. But I think that the tying of programmes with Windows is nothing but a consequence of bundling Windows with the vast majority of personal computers sold in Europe.

In the next article, I shall try to imagine a possible way to address this issue.

References

[*] A Statement of Objections is a formal communication of the European Commission, informing the parties concerned in writing of the objections raised against them[3].