Breaking Up (Microsoft) Is Hard To Do

For nearly two years, Microsoft has played European antitrust regulators the same way it played U.S. regulators: as a bunch of hapless nitwits. This time, however, Microsoft has misjudged its opponents -- and instead of a slap on the wrist, it may face an executioner's ax for its trouble.
For nearly two years, Microsoft has played European antitrust regulators the same way it played U.S. regulators: as a bunch of hapless nitwits. This time, however, Microsoft has misjudged its opponents -- and instead of a slap on the wrist, it may face an executioner's ax for its trouble.The European Union took its first shot at adjusting Redmond's we-dare-ya attitude last week, when regulators threatened to fine Microsoft millions of Euros per day for snubbing a March, 2004 anti-trust compliance agreement. The order covers a lot of ground, but the EU's main beef focuses on whether, and to what extent, Microsoft documents its Windows server communications protocols. These protocols are a key choke-point for third-party software makers competing against Microsoft; the only reason they don't make life miserable for anyone who uses or creates open-source software on a Windows PC is because the folks behind the Samba project work their butts off reverse-engineering Redmond's constantly-shifting mystery meat recipe.

Microsoft has repeated its usual blandishments about how hard it works to comply with these agreements, and about how it suffers at the hands of anti-trust zealots who stay awake nights plotting new and better ways to undermine it. The head EU antitrust regulator, Neelie Kroes, has a different take, accusing the company of providing "incomplete and inaccurate" information in order to undermine the March, 2004 order. An independent trustee -- whom Microsoft itself proposed for the job -- issued an equally damning report on the company's definition of "compliance":

". . .any programmer or programming team seeking to use the Technical Documentation for a real development exercise would be wholly and completely unable to proceed on the basis of the documentation. The Technical Documentation is therefore totally unfit at this stage for its intended purpose . . ."

". . . the documentation appears to be fundamentally flawed in its conception, and in its level of explanation and detail . . . Overall, the process of using the documentation is an absolutely frustrating, time-consuming and ultimately fruitless task. The documentation needs quite drastic overhaul before it could be considered workable."

Kroes' threat to fine Microsoft is no bluff: She gained the power to issue precisely such sanctions last year. Microsoft, in turn, is fighting in court to negate the EU's authority to enforce its antitrust regulations, including its ability to levy fines for non-compliance. While the outcome of that venture isn't as certain as, say, SCO's pipsqueak blitzkrieg against IBM, it's still a long-shot gamble with a distinct downside: Kroes could slap Microsoft with a fine of 2 million Euros (about $2.4 million) per day, retroactive to mid-December, 2005.

That's a lot of money, but of course, "a lot" depends on how much one holds in the first place. As one astute Groklaw regular pointed out, a two million per day fine would eat through Microsoft's current cash reserve in about 60 years -- give or take a decade. While it's misleading to weigh the impact of a fine based only on a company's cash reserves, in this case it's hard to imagine Microsoft thinking twice about any fine that fails to use the billion-dollar mark as a starting point.

Such fines may persuade Microsoft to keep right on playing its favorite games, confident that it will live to fight -- and probably win -- another day. Yet it's possible that EU regulators are pondering a very different, and potentially devastating, solution to Redmond's gleeful recidivism. According to a recent International Herald Tribune news-analysis article, EU trust-busters are ready to consider ending Microsoft's monopoly abuses -- by ending the company's existence. From IHT:

"With the commission now threatening new fines, and with Microsoft digging in its heels, antitrust experts said the EU officials could be running up against the realization that it would be impossible to make its orders stick against a company with such wealth and power without imposing the ultimate antitrust sanction -- a break-up order."

I don't view this as idle speculation; James Kanter, whose byline appears on the article, is an experienced beat writer with good connections and an excellent sense of which way the wind is blowing in Brussels. If Microsoft wants war, the EU is clearly hinting that it's prepared to oblige the company -- with an invitation to Armageddon. If that sounds like an overstatement, keep in mind that Europe is the world's biggest economic entity; if Microsoft gets the hook, it's left with North America and a bunch of places where pirating Windows is about as common as breathing.

By the way, as I mentioned earlier, here's an HTML copy of the March, 2004 EU proceedings against Microsoft, courtesy of the World Legal Information Institute's online database. The anchor/links in the table of contents are broken at the moment, but the text of the entire document is served on the same page, anyway. (The EU's official version of the document is available as a PDF file here.) This is surprisingly good reading, and I'd say it's essential knowledge for any software developer or user who follows the European open-source software sector, or who simply wants to understand the economic and legal threat Microsoft represents to all open-source software makers . If you're in a hurry, skip to Section Four, entitled, "Microsoft's Behavior" -- if this sort of thing ever deserves to be called a "page turner," this is probably the place to do it.