In 1895, Rudyard Kipling wrote: “Oh, East is East, and West is West, and never the twain shall meet.” The US and European Union both count as west, but the gulf between US antitrust law and EU competition law is rapidly becoming as pronounced as Kipling’s cultural chasm. These differences are vividly illustrated by the different responses of the US and EU to long-running disputes that each has had with Microsoft over its marketing practices.
In the US, the dispute was resolved via a consent decree that, roughly speaking, forced Microsoft to configure its operating system to allow outside companies to gain access to the network on equal terms with Microsoft. But competitors could use trade secrets concerning the internal operation of the system only for the limited purpose of interconnection.
The adverse judgment against Microsoft in the EU’s Court of First Instance in September 2007 sustained a European Commission fine against Microsoft of €497m for alleged abuse of its dominant market position. Last month, without any apparent further process, Neelie Kroes, the European competition commissioner, trumpeted a further fine of €899m for Microsoft’s failure to comply with the 2004 decree.
On the merits, I remain deeply sceptical that anyone could develop a coherent theory about the abuse of dominant position that is tied to the particular terms of the contracts that any company offers to either its suppliers or its customers. So long as price may move freely, what is gained by restricting collateral terms, some of which may be sensibly adopted by the dominant company’s competitors?
On this occasion, I do not want to pursue the merits of the EU action, for I am more struck by the enormous gulf in judicial practices in the UK and the US, on the one side, and in the Court of First Instance and other EU tribunals on the other. The CFI’s convoluted September judgment rambled on for hundreds of pages without making it clear how Microsoft had misbehaved on the critical issue of interoperability.
Within the American system, after much initial confusion, a consent decree entered by Judge Colleen Kollar-Douglas in the trial court and upheld by Judge Douglas Ginsburg on appeal fleshed out what interoperability required. But no amount of study can make clear what additional requirements the CFI wished to impose on Microsoft.
The only hint comes from one unclear statement that “in order to be able to be viably marketed, non-Windows work group server operating systems must be capable of participation in the Windows Domain architecture”. That statement seems to hold that any outsider must have enough information about the internal construction of the Microsoft system, not just to hook into it, but also to displace some of its components, however defined, with those of its own manufacture. Far from promoting competition, this view, if correct, sanctions the forced subsidy of new entrants by the incumbent’s labour.
Missing from the decision was any explanation of how this edict advances any of the social welfare objectives of EU competition law. More crucially, the CFI’s clumsy judgment highlights profound difficulties with the EU’s system of anonymous judging. Put in the simplest of terms, the CFI procedures lead to a marked reduction in the quality of judicial output. Why? By eliminating competition among judges, of course.
Within the UK and US systems, all judges, with the exception of some Per Curiam decisions, sign their written opinions. At this point, a turgid or misguided opinion imposes a real cost on the judge who writes it, who therefore thinks twice about what he or she says. In addition, the knowledge that a signed concurrence or dissent is in the wings pushes the judge to put more work into a majority opinion than might otherwise be the case. And the judges know that well written opinions will find their way into casebooks and law review articles, where they will increase their influence and prestige. Anglo-American decisions are by no means perfect, but they have a personal touch and a sense of urgency that make many of them well worth reading.
In the CFI, like many other European courts, opinions have no authors at all. No one knows for sure whether they are written by the judges themselves or their administrative staff. Good work generates no personal gain and poor work imposes personal costs. The refusal to allowing dissenting opinions means that the judges do not face intellectual competition. Instead, behind closed doors, they work out compromise positions that could easily be more incoherent than any of the multiple positions held by individual judges. The only imperative is to give some explicit recognition to all the many submissions filed with the court, whether or not they advance the argument. A sterile and insular work is devoid of any effort to grapple with the rich scholarship in competition law or anywhere else.
This bureaucratic impersonality makes the CFI’s decisions unreadable, and thus reduces their influence proportionately. In a disconcerting way, the CFI process also undermines the values of rule of law that its impersonality is intended to achieve. Since no one reads the court’s tedious tomes, what really matters are the public statements of the European Commission – in this instance Ms Kroes, who has repeatedly uttered harsh and intemperate statements about Microsoft. Her impatient and imperious attitude was evident in her curt dismissal and strong denunciation of Microsoft’s behaviour for “flouting” the rules (see here), without offering any explanation as to how that hefty fine was computed or why. Quite simply, she knows that anonymous judges are not likely to overturn her actions. And thus the weak and anonymous judges in the EU system cede centre stage to overzealous enforcers. The only cure requires stiff judicial competition that starts with signed opinions and signed dissents.
Richard A. Epstein is the James Parker Hall Distinguished Service Professor of Law, The University of Chicago; Peter and Kirsten Bedford Senior Fellow, The Hoover Institution. Epstein has consulted from time to time with Microsoft, but not on any of the matters pertaining to the decision in the CFI or its aftermath. The views expressed here are entirely his own.
Get alerts on Technology sector when a new story is published