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Microsoft's Price Fixing Penalty, 9M Euros
freakxx writes "Microsoft has been slapped with a fine of 9 million Euros by German regulators over illegally fixing the price of its Office-suite in an anti-competitive manner during a retail-promotion fair. Microsoft has accepted the fine and decided not to take this issue to any higher level."
Given the current exchange rate that's roughly $12,000,000 United States Dollars.
That's not the issue in this story. It's under German law, that the supplier and retailer can't agree on what the retail price will be.
Anti-trust laws exist to protect the market as a whole, in the 90s and early 00s the laws were used to prevent microsoft from using its dominance in one market (Operating Systems) to unfairly crush other businesses with monopolistic business practices. For example Sun's JVM versus Microsoft's JVM, which was a broken implementation designed solely to disrupt Sun and leveraged through Microsoft Windows autoupdate, something Sun could simply not compete with.
In the United States, anti-trust law usually will look at harm to consumers. Harm to competition is good. Of course, a monopoly makes things a little different. Even with a monopoly and predatory pricing, though, you have to show how that will monetize the harm later on down the road. Predatory pricing is rarely effective because it is so hard to make more money in the long run. This case isn't predatory pricing per se, but I think the theory of harm is generally the same. Anyways, European countries generally have a very different view of antitrust law and the US does, and are much more willing to use it to accomplish abstract concepts of fairness and social justice, as opposed to regulating a market for the benefit of consumers.
http://bgcommonsense.blogspot.com
This is not the manufacturer and retailer agreeing to a price between them. This is the manufacturer dictating to the retailer what price the RETAILER gets to charge its own customers.
Once the manufacturer has sold a product they should no longer have any control of it. Should the car dealer you bought from be able to dictate the price you charge when you resell it later on? Should the home builder be able to dictate what price a susequent owner sells for? I for one think not. Once the product is sold the prior owner should have no control over the new owners dealing with that product.
According to Microsoft's 1st quarter 2009 earnings report, net income for the quarter was 4.37 billion US$.
Assuming a quarter has 90 days (and not distinguishing between working and non working days), MS makes
4370000000 / (90 * 24 * 60) = 33719 US$/minute
which means that Microsoft will make the 12.000.000 US$ in less than 7 hours - and this including non-working days, and assuming 24-hour days.
If you're not MS, you may weep now.
"The agriculture ministry is not in charge of Gundam" - Japanese ministry official.
No, that's illegal. I'm surprised it isn't illegal in the US.
They can say 'If you want a contract with us, we're going to charge you $X per unit' but the retailer is free to set any price they like above or even below that. To do otherwise is price fixing - it destroys competition in the marketplace by forcing everyone to sell at the same (inflated) price.
Wrong. It is *not* the legal costs.
Legal fees are regulated in Germany. For a 9 Mill Euro court fight, assuming they use in-house lawyers for their defense, the standard costs (2 "full fees") to get a judgement are just Euro 20912.
Seems MS just sees no chance to win...
No. The harm is generally the conversion of consumer surplus into monopoly rent. It has nothing to do with any rights in any Hofeldian or legal sense. It has more to do with the economic theory of monopolies and efficient markets. And, depending on your theory of rights (the one you seem to be trying to assert was valid under Lochner, but has been frowned upon since the 1940's), there will always be a conflict somewhere. Congress decided that the more efficient solution in this case is the best solution, and that's why we look at the harm to consumers.
http://bgcommonsense.blogspot.com
The product in question was heavily advertised in the autumn of 2008 in stationary retail outlets. Amongst others, a nationwide active retailer advertised the product with financial support from Microsoft. Even before the launch of the advertising campaign in mid-October 2008, employees of Microsoft and the retailer in question had agreed on at least two occasions on the resale price of the software package "Office Home & Student 2007".
Not every contact between supplier and retailer regarding resale prices constitutes an illegal concerted practice within the meaning of Section 1 ARC. However, this must not lead to a form of coordination where the supplier actively tries to coordinate the pricing activities of the retailer and thus retailer and supplier agree on future actions of the retailer. In the present case, this boundary has been crossed. Microsoft has accepted the fine.
http://www.bundeskartellamt.de/wEnglisch/News/2009_04_08.php
i dont know what cuurency converter that you are using but my calculations
come out to be 11,994,897.00. quite the far cry from a billion as you stated
Thanks for pointing that out. I forgot to mention that in my original post.
Taking this into account, it's surprising that M$ didn't at least make an effort to resist the fine.
9 million Euros = 12.0177 million U.S. dollars Please, if you are going to make stuff up, preface your posts with "I may not know what I am talking about, but..."