This week, the European Court of First Instance (CFI), Europe's second-highest court, upheld a €497 million ($690 million) European Commission (EC) antitrust judgment against Microsoft... European Protectionism Targets American Companies, Worldwide Innovation

Unable to defeat American companies in the open marketplace, protectionist European bureaucrats are instead resorting to litigation and regulation to kneecap American companies and protect their own. 

This week, the European Court of First Instance (CFI), Europe's second-highest court, upheld a €497 million ($690 million) European Commission (EC) antitrust judgment against Microsoft, which it accused of "abusing its market power."  And precisely how did Microsoft abuse its power?  According to the EC, by having the audacity to cater to consumer preference by including its digital media player in Windows. 

It should be noted that when Microsoft compliantly offered a stripped-down version of Windows without the media player, almost no one chose to purchase that version.  Just brilliant, those European central planners. 

Not only did the EC impose the draconian $680 million fine, but it also ordered Microsoft to surrender confidential computer codes to its competitors.  This is akin to a European court ordering Coca Cola to share its secret formula with competing cola companies, simply because consumers overwhelmingly preferred Coke to other brands. 

Further demonstrating the utter arrogance of the European bureaucratic mindset, European Union Competition Commissioner Neelie Kroes even suggested a specific market share for Microsoft: 

"You can't draw a line and say exactly 50 percent is correct, but a significant drop in market share is what we'd like to see.  Microsoft cannot regulate the market by imposing its products and its services on people." 

Consider the stark absurdity and irony of that pronouncement for a moment.  Ms. Kroes, a European bureaucrat who imposes her will upon consumers, bizarrely suggests that a company whose products are overwhelmingly preferred in the open marketplace is somehow "imposing its products and services on people." 

Furthermore, her confidence in mystically divining a precise market share recalls the worst Soviet five-year plans.  According to her logic, even if 100 percent of consumers wished to purchase Microsoft products over inferior competitors, only half of them should have the opportunity to do so.  What's next?  A lottery to decide who can purchase which products, as determined by bureaucratic whim? 

More fundamentally, however, the CFI ruling declares open season against technological innovation, and subjects every American firm to international regulatory wrath. 

For example, innovative companies will now become fearful that their inventions will somehow be characterized by bureaucrats as "anti-competitive" simply because they prove wildly popular among consumers.  This fear will consequently chill the process of innovation at its inception. 

Additionally, the CFI ruling increases the fear that innovative companies will ultimately be forced to surrender their hard-earned intellectual property to competitors who happen to be favored by regulators for one whimsical reason or another.  What is the incentive to pour billions of dollars and working hours into creating revolutionary products if you'll be rendered unable to recoup those investments in the market?  It is fundamentally unfair to deprive innovators of the ability to enjoy the benefits of their hard work and investment, and it is equally unfair for competitors to obtain a free ride on others' industriousness. 

Finally, the CFI ruling sets a very dangerous precedent for other governments and companies across the world.  What, for instance, is to stop countries like China or India or South Korea from following Europe's lead and ordering American companies to surrender their intellectual property to domestic corporations?  And what is to stop foreign companies from suing American companies for allegedly "anti-competitive" behavior simply because those American companies prove more popular among the consuming public? 

Sadly, the potential consequences of this ruling are impossible to fully quantify.  But the ruling does guarantee at least one thing:  it is consumers who will suffer most in the form of higher prices and, ironically, less competition. 

The simple fact is that market share and product characteristics should be determined by free consumer choice in the open marketplace, not by regulators or courtroom litigators.   And as the economy becomes more global, it is incumbent upon the American government to act against this growing form of protectionism before it's too late. 

September 20, 2007
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