Europe’s New War With America

Europe’s New War With America

By Seth Jayson (TMF Bent) August 26, 2004

If you were spooked by the vision of technology and institutional hubris gone amok in Minority Report, pull the covers over your head now. This week, the European Union’s (EU) European Commission (EC) opened an investigation into a Microsoft (Nasdaq: MSFT) and Time Warner (NYSE: TWX) deal that would give them control of digital rights management (DRM) company Contentguard.

The crime? Future domination of a market that does not yet exist.

If you’re confused or angered by this, then you must not be a socialist or an EU commissioner. So step outside yourself for a moment, you capitalist dog, and try to see things from the EC’s side of the table.

Here’s what the EC claims: “It appears to the Commission that the transaction might possibly create or strengthen a dominant position by Microsoft in the market for Digital Rights Management (DRM) solutions.”

Silly me, but I thought the whole point of a business was to make money from a competitive advantage. Apparently, in Europe, competition is OK, so long as there’s no winner. That may be a nice way to run a church T-ball league, but it’s no way to advance an economy or culture. (But maybe it explains a few things about the medal counts in Athens these days.)

Another unfortunate reality for the commissioners is that there isn’t much of a market for DRM at all right now, and the leader in the field is the only company making a splash in the download biz: not Microsoft but Apple (Nasdaq: AAPL). Of course, from the EC point of view, Cupertino had better stop selling so many iPods. Not only is the device cuter than the other players out there, but also it refuses to run files from RealNetworks (Nasdaq: RNWK) and other competitors. That’s clearly an advantage, and therefore, it must be stopped. Oh, and by the way, Wal-Mart (NYSE: WMT), Home Depot (NYSE: HD)? Your low prices and tight inventory control put your competitors at a disadvantage. Get out your checkbooks.

You get the idea. The EC’s recent record on big business looks a lot more like sour grapes than consumer protection. Earlier Microsoft settlements and the ongoing Intel (Nasdaq: INTC) investigation have been long on suspicion and short on substance. Unfortunately for shareholders, the easiest thing to do is often just to pay up so the EC will shut up.

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