European Antitrust: Is Big Bad Again?

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Luke Froeb, Sep 17, 2007

This piece was originally published on the author’s Management R&D blog, and is reprinted here with the permission of the author. The original post, and comments thereto, may be found here.

Every MBA program in every country teaches students to compete using the “four P’s” of marketing: price, product, place, and promotion. So when Microsoft began distributing its media player with its operating system, it would seem that it was competing by taking advantage of its low cost distribution channel (“place”) and by improving functionality (“product.”) Not so fast. Today, the Court of First Instance ratified the European Commission’s case against Microsoft, accusing it of “abusing its dominant position” by bundling its media player with Windows, and by refusing to supply “inter-operability information” to competitors. The Court seemed to be saying that because Microsoft was taking advantage of its advantages, it violated the antitrust laws. Disappointingly, the Court failed to articulate a principle that would tell firms when they are competing on the merits and when they are going to violate the increasingly murky European antitrust rules about dominant firm behavior. And, in an unfortunate choice of words that invites criticism from those who remember the bad old days of antitrust, the Court seemed to admit t