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In your team’s own words, you will identify and discuss the general geopolitical problem, identify the key players involved in the case, provide sufficient details on the specific context, assess the contending forces faced by the firm, detail the company’s strategy (or strategic options) and assess the choices made (or make a recommendation if possible).
Papers should be written in a clear and concise manner and integrate material from multiple primary and secondary sources including, if at all possible, material in the team’s language (local press accounts, company documents, local analysis, …).
Text should be double-spaced with 1” margins in a 12-point Times New Roman font. References, tables, charts and figures do not count towards the page limit but should be used only when they complement the text.

Eight basic components should be found in the submitted 18 -20 page paper.
Page lengths described for each component are suggestions of a normal distribution across sections only and should not be considered binding if your topic merits relatively more/less details in a given section. However, the complete paper must fall within the page limit and formatting requirements described above.
I ONLY DO THE PART 4 THIS IS THE INFORMATION ABOUT PART 4
4. Elaboration of the geopolitical environment/country/region that clearly involves a geopolitical story (Politics, laws, regulations, geography) and the impact of this environment on the company(ies).Explanation of the Geopolitical Influence on the firm strategy. I.e. how do the geopolitical dimensions affect the company’s strategy? You can show facts and figures about the geopolitical dimensions within that specific country/ environment.

Answer

Title: EU against Microsoft

Contents

Overview of EU’s Geopolitical Influence on Microsoft’s Strategy. 1

Influence of EU Politics on Microsoft Operations. 2

How Microsoft’s Strategy Has Been Affected By EU Laws, Specifically the Anti-Monopoly Provision in Article 82 of the EU Treaty. 4

Works Cited. 7

 

Overview of EU’s Geopolitical Influence on Microsoft’s Strategy

The European Union’s geopolitical environment has affected Microsoft’s operations in a very profound manner. A major pointer of the EU’s geopolitical environment is the struggle that Microsoft has had to go through since the turn of the twenty-first century while fighting anti-trust litigation. The EU has been keen to make very detailed follow-ups to determine whether Microsoft has complied with all court orders and regulations. In fact, Microsoft’s troubles in the EU may be said to have started during the mid-1990s due to compatibility problems with one of its software programs, Windows Media Player. The convoluted litigation process in the EU shows that the geopolitical environment in that region emphasizes the need to protect the competitive process.

In the first case against Microsoft, the complainant was Sun Microsystems, whose managers complained that Microsoft was withholding crucial information required by Sun Microsystems to enable its servers communicate with computers operating using Windows-based system. Regulators sent by the EU Commission to investigate the allegations found claimed that Microsoft had acted in violation of Articles 82(b) and (c) of the European Commission Treaty. Under these articles, a company may not limit the production, marketing, or technical development that may be prejudicial to the interests of consumers. The articles also require a company to apply similar conditions to all trading parties engaging in equivalent transactions for the simple reason that this places those companies at a major competitive disadvantage.

Further investigation showed that Microsoft’s licensing policy was abusive towards users, a move that investigators felt was geared towards leveraging the company’s market power in the workgroup server markets. The investigating team even went as far as to claim that Microsoft had erred in law by bundling its Windows Media Player into its Windows operating system. To justify its claims, the EU Commission opined that customers were discouraged from switching from Microsoft’s system to that of competitors because of interoperability problems. This amplification of the initial charges creates the impression that the EU’s geopolitical environment is hostile to Microsoft’s business strategy.

Influence of EU Politics on Microsoft Operations

To understand the politics behind the anti-trust litigation confronting Microsoft, one must look at what is at stake as far as the outcome of the case is concerned. The complexity of the litigation arises from the fact that the contemporary media player is not just about music; rather, it is about the struggle for the control of digital rights in the information age, particularly within platforms that extend beyond the personal computer to reach mobile phones and televisions. The outcome of the case is a major determining factor for choice of operating system that consumers around the world will use in their televisions and mobile phones. It seems that that EU regulators would want to see a situation whereby most media streams are not in the Windows Media format as it is the case today. This means that as far as the EU Commission is simply enforcing its policies and laws, one cannot rule out the existence of a political dimension to Microsoft’s problems.

EU regulators are concerned that if the present trend continues, an effective platform for competition will not exist once a large proportion of content starts being delivered to consumers through other platforms such as the television and the mobile phone. Even if the use of the WMP platform was to be restricted to the personal computer, it does operate independent of platforms, meaning that the threat from Linux would be significantly reduced. Thus, the high-stakes encounter is all about Microsoft’s struggle to incorporate digital media into its existing empire and EU’s efforts to make sure that the company does not achieve this objective. Such an argument is plausible particularly when it is viewed in light of the view that the EU Commission failed to choose the best remedy in order to address the situation.

Following deliberations on the matter, the Commission ruled that it would give Microsoft 120 days to provide information on all protocols that were of interest to competitors who wanted to achieve interoperability with Windows servers and PCS. This requirement was also aimed at eliminating the competitive disadvantage that had continued to affect low-end server vendors within the market. Additionally, the commission compelled Microsoft to start making available to manufacturers a new version of operating system that does not have the Windows Media Player. However, the company was allowed to retain the option of selling a version of operating system that is bundled with the Windows Media Player. The EU Commission’s ruling also imposed a €497.2 million on the company for the antitrust violations (Jennings 79).

The element of politics seemed to manifest itself because the EU Commission adopted an adversarial approach not only to complaints about Microsoft’s anti-trust violations in relations to the Windows Media Player, but also in other claims that emerged afterwards. For example, in 2006, Microsoft hired a large team of experts to work on the task of providing the necessary documentation to competitors as directed in the 2004 ruling. Even then, the information provided was declared inadequate, thereby leading to the imposition of an additional fine of €280.5 million (Lawrance, Peirson 236). Based on this development, one may not rule out the possibility that the Commission’s 2004 decision was not the best as far as Microsoft’s ability to address the complaints raised by competitors was concerned.

How Microsoft’s Strategy Has Been Affected By EU Laws, Specifically the Anti-Monopoly Provision in Article 82 of the EU Treaty

Article 82 of the EU Treaty was also relied on during the emergence of yet another anti-trust complaint, this time from Opera, a competitor that was aggrieved by Microsoft’s bundling of its World Wide Web browser, Internet Explorer, into its operating system. The resulting investigations culminated in a €899 million fine (Economides and Lianos 18). In 2013, Microsoft received yet another fine from the European Union, this time amounting to €561 million, for its failure to comply with its existing commitments, which entailed providing consumers with a screen containing options on browser choice, which would enable them to make a choice on their preferred World Wide Web browser.

In anchoring its decisions on the anti-monopoly provisions of the EU Treaty, particularly Article 82, the EU Commission sought to achieve the goal of imposing retributory consequences for infringement and fighting anti-competitive behavior as well as introducing incentives for the recurrence of anti-competitive behavior. Article 82 provides that the resulting decision should restore the competitor to the position he could have occupied within the market had the infringement not occurred. However, in the cases of Windows Media Player and Internet Explorer, it is difficult to determine what that rightful position of the litigants would have been if the antitrust violations had not occurred. Thus, the EU Commission to some extent relied on political considerations in making a decision on the fines to be imposed.

The prominence of the political dimension in Microsoft’s latest fine arose because this was the very first time that the EU Commission was imposing a company for its failure to comply with a previous commitments decision. Moreover, important, the EU Commission, for the first time, admitted that it had failed to create a conducive environment for Microsoft to fulfil its commitments. This is hardly surprising because competition law, by its very nature, is prone to errors (Geradin and Petit 8). However, it is unfortunate that EU regulators may have exploited the lack of conceptual homogeneity that allows for such errors to make a political statement regarding the immense powers that they wield over giant companies with overseas headquarters such as Microsoft.

Indeed, geographical factors may have played out in the politics of the series of antitrust rulings that the European Commission has handed down against Microsoft. During the decision-making process that yielded the decision, the EU Commission seem to have put into consideration the notion that U.S. multinational corporations such as Microsoft tend to underestimate its powers (George, Dymally and Lacey 15). Another way to look at the geographical divide as a factor in the ruling is to examine how U.S. regulations differ from those of the EU. A noteworthy point is that complaints against Microsoft similar to those of the EU had been launched in the U.S. but were dispensed with once and for all. The fact that EU’s complaints continue to drag on more than a decade later may be a pointer to existing geographical differences in antitrust laws as well as regulations that address competition and monopolization. These geopolitical dimensions have had far-reaching effects on Microsoft’s strategy because they portend a situation whereby the company is being compelled to adjust its existing business strategy in order to survive in the EU market. A good example is the company’s commitment to start producing computer operating systems that are not bundled with its proprietary software such as Windows Media Player and Internet Explorer.

 

Works Cited

Economides, Nicholas and Lianos, Ioannis. “The quest for appropriate remedies in the EC Microsoft cases: A comparative appraisal.” In Luca Rubini, Microsoft on Trial: Legal and Economic Analysis of a Transatlantic Antitrust Case. Cheltenham: Edward Elgar, 2010. Print.

George, Barbara. , Dymally, Lynn and Lacey, Kathleen. “Increasing Extraterritorial Intrusion of European Union Authority into U.S. Business Mergers and Competition Practices: U.S. Multinational Businesses Underestimate the Strength of the European Commission from G.E.-Honeywell to Microsoft.” Connecticut Journal of International Law, 19.3, (2004): 15-29.

Geradin, Damien and Petit, Nicolas. Judicial Review in European Union Competition Law: A Quantitative and Qualitative Assessment. Paper prepared for the GCLC’s Annual conference “The Role of the Court of Justice of the European Union in Competition Cases”, Brussels, 7-8 October 2010.

Jennings, John. Comparing the U.S. and EU Microsoft antitrust prosecutions: How level is the playing field? Erasmus Law and Economics Review, 2.1 (2006): 71–85.

Lawrance, Sophie and Peirson, Laura “The General Court’s 2012 Microsoft judgment: ‘reasonable’ fines.” Journal of Intellectual Property Law & Practice, 83, (2013): 236-240.

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