Relato de la modernidad y la influencia de Hollywood

The discussion above shows that the Commission and CFI have applied the law regarding tying in a manner which is in principle consistent with previous case law. Those changes that were made were either semantic changes (changing the test from separate consumer demand to separate products) that were unnecessary or were changes that brought in the greater opportunity to use economic analysis when considering the impact of the tie (foreclosure). As such the test, whilst changing the approach by making greater use of economics to find when a tie exists, does not change in substance, the aim of tying law; seeking to maintain customer freedom.

Nevertheless, it is submitted that an amendment should be made to improve the legal test for tying further in terms of legal certainty and semantic clarity.

The first stage of the test should be amended so that the tying test reads:

(i) the tied good is subject to independent consumer demand;

(ii) the undertaking concerned is dominant in the tying product market;

(iii) the undertaking concerned does not give customers a choice to obtain the tying product without the tied product; and

(iv) the tie forecloses competition.

This would retain the beneficial fourth stage of the test while altering the first stage so that it expressly requires independent customer demand and thereby

212 ibid para 1143

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highlights the aim that the law is actually seeking to achieve: protecting the customer’s freedom to purchase the products they desire.

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6.0 Conclusion

This chapter has established that the Microsoft test changed the law on tying in two ways. The first was the exchange of “independent customer demand”

with the phrase “separate products”. While the latter term allows the Commission to take a greater number of factors into account, it has been argued that it is a poor phrase to use because it suggests that there are objectively observable characteristics that make products separate, when what is actually key is to establish whether there are customers²¹³ who want to purchase the products separately. Establishing customer demand is important because if it exists, then in the absence of practical reasons why it is not possible, or objective justification why they should not be offered independently, the dominant undertaking should provide the products separately, rather than seek to restrict the freedom of its customers.

The second way in which the law on tying was changed was that it has now added the express requirement of establishing foreclosure. This is significant as it allows the Commission and courts to introduce greater economic analysis into their assessment of tying. It means that the competition enforcement authorities can, instead of assuming that tying will foreclose a market, set out the specific way in which they believe that the dominant undertaking’s tie will damage competition in the market place or why they believe this is not the case. In support of this they can rely upon economic models and market specific assessment in a manner that reflects a post-Chicago style of analysis.

This chapter has established that Microsoft I was a major change in the way the Commission and courts approach tying. While previously tying law was determined by reference only to Ordoliberal principles (thus the mono-theoretical period) Microsoft I marks the beginning of the di-mono-theoretical period.

That is the period in which the Commission and courts pursue the Ordoliberal aim of customer freedom, but use an economic style of assessment that

213 A not insignificant number of customers

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follows post-Chicago analysis. This development means that cases from this point on wards are likely to contain far greater use of economic models and far greater use of empirical economic data in order to establish what precise effect a tie is going to have on a market. This will include looking not just at the direct effects, but the effect that a tie may have on other market actors whose products or services are used in conjunction with the dominant undertaking’s product.

Finally a normative proposal has been put forward subtly altering the wording of the test proposed in Microsoft I. The purpose of this is to maintain the positive changes brought about by the Microsoft test, such as a greater opportunity to use economic analysis to establish foreclosure, but alter the phrasing of the first arm of the test to bring greater clarity and provide greater emphasis on customer demand. The consequence of this alteration is that the test reflects the purpose of tying law more accurately, that is; to preserve the freedom of the customer to choose the combination of products that is most efficient and provides greatest utility to them.

The purpose of this chapter has been to demonstrate that the Microsoft I decision provides a watershed in the development of EU tying law. Microsoft I represents the beginning of the di-theoretical period. During this period the Ordoliberal aim of preserving customer freedom of choice remains consistent as in the mono-theoretical period, but in addition to this a post-Chicago style of analysis begins to be incorporated into the EU approach. From this point on economic empirical evidence and economic models of competitive harm begin to take an increasingly important place in establishing if and how a tie causes anti-competitive effects. The purpose of this chapter has also been to argue that the law was applied appropriately in Microsoft I and the criticisms laid against its assessment of separate products and foreclosure stem from taking certain parts of the decision out of context. However, use of the term

“separate products” was problematic and only obfuscated the aim of the law and the test. To resolve this, a reformed test has been proposed that alters the wording of the law to make clear its meaning and purpose.

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Chapter 6

Re-assessing the Microsoft I remedy

Re-assessing the Microsoft I remedy

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1.0 Introduction

This chapter will contribute to the thesis by explaining that the failure of the Microsoft I¹ remedy was not a result of faulty application of the test for tying per se, but rather an ill-considered remedy that did not take into account the particular characteristics of the market it was set in (unlike the assessment of tying itself). It will also demonstrate that there are superior, innovative remedies that could have been used to bring about the end of Microsoft’s tie.

These matters are important to the thesis for two reasons. First, it is important to establish that the failure of the remedy was not due to a flawed application of the law² by the Commission but due to flaws within the remedy itself. It is important to establish what caused the failure of the remedy to show whether it is the application of the law or type of remedies employed that needed to be amended. Second, once it is established that the failure of the remedy rests on flaws of the remedy itself, it is necessary to present normatively superior remedies so that in future decisions there are models that can be used or adapted in order to produce appropriate remedies that lead to greater effective competition.

The remedy in Microsoft I required Microsoft to release a version of Windows without Windows Media Player (WMP). Microsoft complied with this remedy and released “Windows N”, a version of Windows without WMP. This version of Windows however did not attract any real customer demand.³ There are two main categories of academic opinion on why this happened. One group⁴ believes the case should not have been brought against Microsoft in the first

1 Microsoft (Case COMP/C-3/37.792) [2005] 4 CMLR 1043;T-201/04, Microsoft v Commission [2007] ECR II-3601

2 As has been argued by some, see: Christian Ahlborn, David S. Evans, 'The Microsoft Judgement and its implications for Competition policy towards dominant firms in Europe' (2008) 75 Antitrust L.J. 887, 919, 922; T-201/04, Microsoft v Commission [2007] ECR II-3601, para 943

3 < http://www.microsoft.com/presspass/legal/european/04-24-06windowsxpnsalesfs.mspx>

published April 2006 (accessed 29 May 2013)

4 Christian Ahlborn, David S. Evans, 'The Microsoft Judgement and its implications for Competition policy towards dominant firms in Europe' (2008) 75 Antitrust L.J. 887, 920; Jean-Yves Art, Gregory v.S. McCurdy, 'The European Commission's media player remedy in its Microsoft decision: compulsory code removal despite the absence of tying or foreclosure' (2004) 25(11) E.C.L.R. 694, 697; Hedvig Schmidt, 'Article 82: is technological integration checkmated?' [2009] 4 J.B.L. 354, 370

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place because integrating Windows and WMP was not really a tie. Some in this first group have used the lack of demand for Windows without WMP to suggest the decision in Microsoft I itself was flawed.⁵ Others⁶ have argued that the remedy itself lacked merit and failed as a consequence. Most in this second category recognise that the issue revolves around the fact that media players are usually priced at £0.00.⁷ The result of this is the rare situation where the price of a product is 0 and the cost of its implementation is likely to be >£0.00 due to search and implementation costs. It will be argued in this chapter that the failure of the remedy was a failure in its own right based on the circumstances of the market, specifically the price of media players, and the way the remedy was implemented, which did not take account of the cost of market actors integrating new media players.

Even amongst those who recognise that the flaw that led to the failure of Windows N lies in the Microsoft I remedy, what is missing from the debate are proposals for an effective substitute remedy. There is little discussion, including amongst those who recognise the deficiency of the original remedy, as to what would have been an appropriate remedy or what remedy should

5 Christian Ahlborn, David S. Evans, 'The Microsoft Judgement and its implications for Competition policy towards dominant firms in Europe' (2008) 75 Antitrust L.J. 887, 920; see also Microsoft’s own arguments: T-201/04, Microsoft v Commission [2007] ECR II-3601, para 943 6

Renato Nazzini, 'The Microsoft Case and the future of Article 82' (2008) 22 Antitrust 59, 62;

Pierre Larouche, 'The European Microsoft Case at the Crossroads of Competition Policy and Innovation: Comment on Ahlborn and Evans' (2008) 75 Antitrust L.J. 933, 955, 956-957; F Enrique Gonz Alez Diaz, Antòn Leis Garcia, 'Tying and bundling under EU competition law:

future prospects' (2007) 3 Competition L. Int'l 13, 15

7 Roberto Pardolesi, Andrea Renda, 'The European Commission’s Case Against Microsoft:

Kill Bill?' (2004) 27(4) World Competition 513; Maurits Dolmans, Thomas Graf, 'Analysis of Tying Under Article 82 EC: The European Commission's Microsoft Decision in Perspective' (2004) 27(2) World Competition 225, 243; Renato Nazzini, 'The Microsoft Case and the future of Article 82' (2008) 22 Antitrust 59, 62; Pierre Larouche, 'The European Microsoft Case at the Crossroads of Competition Policy and Innovation: Comment on Ahlborn and Evans' (2008) 75 Antitrust L.J. 933, 957; F Enrique Gonz Alez Diaz, Antòn Leis Garcia, 'Tying and bundling under EU competition law: future prospects' (2007) 3 Competition L. Int'l 13, 15

8 Alan Riley, 'Microsoft break-up inevitable?' (2004) 39 Euro. Law. 10; Ian Ayres, Barry Nalebuff, 'Going Soft on Microsoft? The EU's Antitrust Case and Remedy' (2005) 2(2) The Economists' Voice 6 (article 4)

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This chapter will consider a number of alternative remedies in order to establish which would be the most effective and would not be subject to the same weaknesses that undermined the original decision. This will be assessed primarily from an economic point of view; assessing the likely impact of each potential remedy on consumers, Microsoft and Microsoft’s competitors. It is argued that a number of these alternatives would have had a far better effect than the remedy imposed by the Commission, while still maintaining fairness towards Microsoft.

This will be set out in the following way: First, the remedy itself will be explained and why it is generally considered to have failed. Second, it will be argued that the reason why the remedy failed was because it did not take into account the way in which Windows Media Player’s development was funded and the additional cost involved to customers, particularly OEMs,⁹ in adding other media players. As a consequence of these two factors, it will be seen that the Commission’s remedy did not offer an effective choice. Either the customer could pay for a product (WMP) and get it or pay for it and not get it.

In short, it offered no choice at all. Third and finally, seven different remedies that were not implemented, but that could have brought Microsoft’s tie to an end will be proposed, and their advantages and disadvantages explained. All but two of these proposals are the author’s own work. The final remedy suggested is particularly novel and innovative. It is based on ordoliberal principles, and it is argued that it would not be subject to the flaws that have beset the original remedy and would provide greater competition in the market without causing an unnecessary burden to Microsoft, its competitors or consumers.

9 Original Equipment Manufacturers: in this case companies that manufacture computers and pre-install software on those computers before they reach the consumer.