Wednesday, February 27, 2008

How Europe Imposes A "Maximum Wage"

Microsoft charged with a $1.3 billion fine by the EU for charging developers too much money to make compatible products.

Article: EU fines Microsoft a record $1.3 billion

EU regulators said the company charged “unreasonable prices” until last October to software developers who wanted to make products compatible with the Windows desktop operating system.

The Commission, executive arm of the European Union, has now fined Microsoft more than any other firm for failing to comply with sanctions. It said no other company had ever ignored sanctions.

Microsoft had initially set a royalty rate of 3.87 percent of a licensee’s product revenues for patents and demanded that companies looking for communication information — which it said was highly secret — pay 2.98 percent of their products’ revenues.

The EU complained last March that the rates were unfair. Under threat of fines, Microsoft two months later reduced the patent rate to 0.7 percent and the information license to 0.5 percent — but only in Europe, leaving the worldwide rates unchanged.

The EU’s Court of First Instance ruling that upheld regulators’ views changed the company’s mind again in October when it offered a new license for interoperability information for a flat fee of 10,000 euros ($14,900) and an optional worldwide patent license for a reduced royalty of 0.4 percent.

In effect the EU is saying that Microsoft is charging its competitors too much money and thus THEY are making too much money. As a result the EU sets a fine upon Microsoft and in effect THE GOVERNMENT IS CONFISCATING THE MONEY that Microsoft has made in excess of what the GOVERNMENT said was FAIR.

Who defines what "fair" is?

Is there any thought in these regulators that if left alone that Microsoft will seal its own fate? With Linux and the Open Source Movement - which I am a player in - Microsoft is being addressed in the Free Market by alternative software which is improving each year. My personal goal is to have a Non-Microsoft environment on most of the computers that I own. I would like to drive this - not have the government to fine its way into determining the players in the market.

The mindset and practices of European governments are out of hand but are indeed popular as the American left would love to see many of these strong handed regulatory practices adopted by the United States.

If Microsoft decided to ignore the fines and discontinued selling its software in Europe - it would be European businesses and users that will be hurt the most in the short term - the next 5 years or so. In the long run a player such as Linux would step in to fill the void in Europe in the absence of Microsoft.

The European Commission has in effect worked as a competitor against Microsoft. This is the very behavior that has many companies moving out of "Old Europe" into less developed countries in the EU old Soviet Bloc and to Asia.

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