Author(s)
Source
Yale Journal on Regulation, Vol. 25, No. 2, 2008
Summary
This paper assesses competition policy in Europe.
Policy Relevance
European regulators targeted a firm for its success. This discourages innovation. Regulators targeted a multinational firm, hindering trade and global growth.
Main Points
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The European Commission’s (EC’s) rulings against Microsoft show regulators will use competition law aggressively in cases involving intellectual property.
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Microsoft must give rivals access to proprietary information about its server operating system so they can build competing products.
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Microsoft was penalized for selling a media player with its operating system.
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The rulings erode firms’ incentives to innovate over time (“dynamic effects”).
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Requiring a firm to let rivals access its invention lets rivals free-ride.
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The rivals will innovate less on their own.
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Products become more similar, meaning less innovation overall.
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The EC ruling targets a firm for selling a product used by many, not for bad actions that hurt consumers. Success is penalized, and rivals are rewarded in court.