George Pitcher: How the US plans to slam Windows of opportunity

The US has created a united front against terrorism, but it employs double standards in the business arena, as the Microsoft issue demonstrates, says George Pitcher

One wonders whether US citizens are any better educated in the concept of “abroad” since September 11. The US’s military imperialism certainly seems to be running true to form – bombing followed by opposition to civilian casualties, followed by divisions emerging in the administration back home.

Tony Blair has grown in stature on the world stage, but may yet be left somewhat diminished in Europe. The attempt in his conference speech to slip in euro membership as though it was in some way a condition of digging for victory against a greater world enemy was spotted as the cynical gambit that it almost certainly was not intended to be.

The UK’s future European partners have proved distinctly disunited in providing the kind of unconditional support for a global coalition against terrorism – a euphemism for unqualified support of the US – than we have. President George W Bush doesn’t seem unduly bothered by this European reticence, concentrating – not unreasonably – on the Arabic elements of the coalition and accepting only token military resources from a UK that is supposedly standing with him “shoulder to shoulder”. Shoulder to hip, more like.

On the commercial level, the same mix of US condescension towards Europe with an urgent desire for us to do what the US authorities want when it suits them, seems to prevail. This tendency is nowhere more apparent than in current regulatory issues that materially affect American industrial interests.

European Union competition commissioner Mario Monti is about to start an inquiry into Microsoft’s new computer operating system, Windows XP, which is due to go on sale on October 25 as the next generation of the software that is revolutionising our working lives and much else besides.

Monti, quite respectably, wants to know whether the bundling of new software applications into the Windows operating system is anti-competitive. The outcome of such an inquiry is not only critical for Microsoft, which generated some $8bn (&£5.5bn) from its operating systems in its last financial year – over 30 per cent of its annual sales and a much higher proportion of profits – but also for the entire computer industry.

PC manufacturers expect Windows XP to provide a much-needed boost to recently flat sales figures, while suppliers, such as those in the micro-chip industry, also stand to benefit. These are no reasons to overlook a competition inquiry, but it is worth noting that there is a great deal at stake beyond the continued prosperity of Microsoft.

In a different sense, there is much at stake in the US. It is difficult to avoid the conclusion that the vigilance of the European Commission has, at least in part, been encouraged by the anti-trust pressure applied to Microsoft in the US.

And only the most wide-eyed of American innocents – of which we are told there are relatively few these days – would claim that Microsoft and its billionaire founder, Bill Gates, do not have very powerful industrial and political enemies, whose principal concern may not necessarily be that consumers are offered choice and competitive prices in the computer markets.

So bogged down have anti-trust inquiries into Microsoft become in the US, that the presiding authorities have appointed an academic arbitrator from Boston University to sort it out. Three years ago similar arbitration failed to halt the US government’s anti-trust case, which returned to court in August after a Federal Appeals Court in June concluded that Microsoft had illegally maintained its monopoly in operating systems. Microsoft’s appeal to the US Supreme Court was turned down last week.

See what I mean about a litigious and complex power-play? There are plenty who want to rein in the market power of Microsoft and it would be hard, under these circumstances, for the EC not to be drawn in.

But compare and contrast the containment of Microsoft, which is generated by domestic US interests, with an inquiry into American interests that is all of the European Commission’s making. In July, that same commissioner, Mario Monti, blocked diversified electronics conglomerate General Electric’s near-&£30bn proposed merger with Honeywells, the systems solutions group (and not inconsiderable contributor to the computer industry).

Now the US Justice Department is pressing the EC to abandon its legal arguments for blocking the bid, claiming that it “punishes efficiency” and “punishes success” and warns of a prolonged transatlantic rift if Monti holds his ground.

To my mind, the most important issue is America’s attitude of bemused detachment that accompanies a policy of tying up one immensely successful technology company when it suits it to do so, while threatening an entirely independent regulator on another continent with reprisals if it doesn’t obey US interests in another such technology company.

Such detachment doesn’t sit well with the supposed new world order. It’s alleged that the US has lost its isolationist arrogance over the past month. Militarily, that may be so. But, where capitalism is concerned, we have a long way to go before the definition of good regulation rises above what the US wants, meaning among other things the subordination of European interests to American will.

George Pitcher is a partner at communications management consultancy Luther Pendragon


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