Software Design by Competition

IPA REVIEW Software design by competition law Chris Berg urope is providing a steady stream Navigator—was due to IE being bundled Real Networks may have been disap- of wrongheaded and counterpro- with XP. Both products were free—but pointed with the popularity of their prod- Eductive regulations—good for an- free and bundled can’t compete with free uct, many of Microsoft’s rivals should not ecdotes, bad for Europeans. and downloadable, the critics alleged. be. Apple’s iTunes, for instance, has rid- When Windows Vista, the long- Experience suggest otherwise. Mozil- den the popularity of its portable music awaited successor to Microsoft’s operat- la’s Firefox, the heir to Netscape Navigator, player, the iPod. ing system Windows XP, is released to the is rapidly gaining a share of the browser In 2006, before it has been officially general public on January 30, some con- market. Firefox’s success has largely been released, Windows Vista is under heavy sumers around the world will have an ad- due to a perceived lack of security and fire from its competitors, and they’re go- ditional product available. But, if the sales performance with Microsoft’s bundled ing to the European Union for help. The records of Windows XP ‘N’ are any indi- product. Consumers are fickle enough to new operating system includes an array of cation, then Vista ‘N’ will be Microsoft’s choose between competing products. new features for which, presumably, Mi- most unpopular product in a long time. Indeed, there is good reason to sug- crosoft foresees a demand. Producers of The ‘N’ series is a special variety of gest that the death of Netscape Navigator anti-virus and security software object to Microsoft’s operating systems designed in the late 1990s was not due to preda- the new low-level enhancements to secu- specifically to comply with antitrust rul- tory bundling by its powerful competitor, rity—a feature that consumers have des- ings in the EU and in South Korea, which but to consumer disappointment with perately sought for a long time. Adobe, also has aggressive competition laws. In the software itself. Navigator had under- which invented the PDF document for- order to do so, XP ‘N’ shipped without gone a complete rewrite, and was buggy mat, objects to the new document format Media Player, the free video and audio and bloated. When consumers were look- XPS—a more dynamic format than the player which, for users outside these ju- ing to upgrade their browser for the new now standard PDF. risdictions, is bundled with a standard XP features and web specifications becoming The EU fined Microsoft €497 mil- installation. Both versions, ‘N’ and the available, Internet Explorer was simply the lion for bundling Media Player with XP, bundled package, were available to Euro- better choice. and it has been remarkably vague about pean consumers at the same price. In the highly competitive computer Vista’s prospects when it comes before the Unsurprisingly, there have been no re- industry, technological change makes pro- European regulators. While Microsoft is ported sales of XP ‘N’ to consumers since nouncements of such-and-such company already obligated to produce the Europe- it was released in mid-2005. It would be as ‘anti-competitive’ laughable. IBM is only Vista ‘N’, the European regulator’s hard for a market to reject a product any no longer the terrifying anti-competitive role, the EU argues, is not to give a ‘green more entirely. monster that prosecutors described it as in light’ before Vista is available to consum- As has been argued, as long as com- the 1970s—in part because of Microsoft’s ers. If Adobe and others have their way, petition is a download away, the law has aggressive marketing of MS-DOS in the Microsoft could be lumped with another done its job. But a steady stream of regu- first years of the 1980s, and then the Win- massive fine or have its product crippled latory intervention and litigation in the dows 3.1x family of operating systems. for providing new features that consum- computer industry over the last ten years The 2004 competition actions in the ers demand. disagrees. European Union against Microsoft were The nineteenth-century French lib- Microsoft has been a staple target of encouraged by organisations such as Real eral economist Fredric Bastiat divided antitrust authorities across the world. In Networks, which publishes a competing human activity into two categories: ‘har- 1998, the US Government sued the soft- product to Windows Media Player. Again, monious’ and entrepreneurial, or ‘antago- ware manufacturer for tightly integrating Microsoft’s rivals allege that the competi- nistic’ and rent-seeking. Unfortunately, as its Internet browser with its operating tiveness of their product is harmed by the the vibrant, innovative technology indus- system. The litigants alleged that their product bundled with Windows. The EU try becomes bogged down in competition victory in the ‘browser wars’—a period regulators forced Microsoft to provide litigation, too many are showing them- of vigorous competition between Micro- European consumers the option of buy- selves to be the latter. soft’s Internet Explorer (IE) and Netscape ing XP ‘N’—without the bundled Media Player. Microsoft wanted to call the package ‘Reduced Media Edition’ until the Chris Berg is the Editor of the EU objected. IPA Review. But again, reality intervenes. While I P A R E V I E W 6 DECEMBER 2006.

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