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Microsoft's Price Fixing Penalty, 9M Euros

Posted by ryuzaki0 on from the oh-darn-guess-we'll-do-that-again dept.

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."

27 of 237 comments (clear)

  1. small change... by smoatigah · · Score: 5, Funny

    Thats going to make a huge dent that is...

    1. Re:small change... by furby076 · · Score: 3, Insightful
      This is a huge dent. Let's say if they didn't price fix they would sell their product at $100, but after price fixing they sell their product at $25. Their additional profit is $25/unit. So paying 9 mil Euros will put a huge dent into that additional profit if not take it out completely. Remember we are talking about a local subsidiary of MS, not MS corporate home. If MS let's them shoulder the burden of that penalty it would be heavy.

      Though I am wondering how they are doing price fixing. If they have a suggested retail price on the box that does not fall under price fixing. Stores are not obligated to sell at those prices but historically stores are given some kind of preferential treatement (e.g. becoming an authorized dealer) for selling at the suggested price. The other upside is that Store A doesn't price gouge itself to be better priced then Store B. That's not price fixing. So going by

      Microsoft has influenced the resale price of the software package--Office Home & Student 2007--in an anticompetitive manner

      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. I

      Dude is making wind to get some brownie points (works great on /.). In all honesty setting a suggested retail price != price fixing. Again, if anyone here believes that they may want to sue every company that produces a product with a price attacked to the packaging from the manufacturer.
      BTW i highlighted the "anticompetitive manner" it doesnt' state against what. Anti-competitive against Open Office? I doubt that. Anticompetitive against other MS Office retailers? Why would corporate do that? They don't care what the retailers sell it at as long as they get their money for each box sold (which they set the price). It's popular and easy to slam MS because it's been done before. The number 1 company in a given market is always viewed as the evil of the world. Since they have tons of money it's "OK" to sue.

      On a side note I find fault with statements like this

      Russia recently announced that it was considering adding Microsoft to a list of companies with high market share that might be subject to additional scrutiny under that country's antitrust laws,

      So if I create a prodcut that EVERYONE loves and EVERYONE MUST HAVE I should be put under scrutiny and sued? Even if I didn't do anything wrong I am supposed to be punished because everyone loves my product? The American dream (or any other countries dream) being torn down one lawsuit at a time. I feel that Russia will sue because getting 9 mil euros is an easy way to increase a countries income.

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    2. Re:small change... by GameMaster · · Score: 4, Funny

      It may not look like much, but when you convert it from Euros to US Dollars it's something like $1.3 billion. ;-)

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    3. Re:small change... by Kynde · · Score: 3, Insightful

      >> Russia recently announced that it was considering adding Microsoft to a list of companies with high market share that might be subject to additional scrutiny under that country's antitrust laws,
      >
      > So if I create a prodcut that EVERYONE loves and EVERYONE MUST HAVE I should be put under scrutiny and sued?

      You create a one-hit-wonder, then perhaps no. But you dominate a market quite a while, regardless of how superior your product is, then yes, you should be subject to scrutiny. Not outright sued ofcourse, the gp never said that.

      There is a good goddamn reason we have antitrust laws. It's just that now that the companies have gone so global that the countries into which they roll in the profits too seldom tend to go after them.

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    4. Re:small change... by somersault · · Score: 3, Insightful

      Even if I didn't do anything wrong I am supposed to be punished because everyone loves my product?

      Do you seriously know anyone who "loves" Windows? I hear people complaining about how they want to throw their computer across the room or how they are "rubbish with computers", but not many who say "wow, I love how intuitive this Control Panel/window manager is!".

      Perhaps you don't quite understand what a "monopoly" is, or why it is bad for the consumer. It's like saying that people in a communist regime where everyone is given daily bread and water rations must really love bread and water if that's the only thing they ever eat. Or imagine that each brand of car could only run when kept supplied with the manufacturer's own brand of fuel and oil - whoever had the best fueling infrastructure would win. Microsoft currently has the best "infrastructure" simply because they got in there first, so many business applications and games are heavily reliant on Windows rather than the more open platforms that have become available as the world of personal computing has matured. As more software companies start to make their software available on different OSes or move applications into the browser etc, we'll see what people really "love".

      --
      which is totally what she said
    5. Re:small change... by jbengt · · Score: 3, Insightful

      Having a product, and subsequent versions of that, which people utilize is not a monopoly

      Obviously.

      To punish a company for making a successful product is wrong - it makes companies want to figure out how to avoid punishment

      There, fixed that for you.

      The market helped make MS the dominant producer.

      Go back and learn some PC history. It was the IBM monopoly that gave MS its' early edge, and MS did use illegal means to leverage that leg up into a OS and office suite monopoly.

      If I didn't have IE built into my computer how was I supposed to go to Mozilla's website and download firefox?

      Right, because it's impossible for the retailer to bundle a browser other than IE.

      If I didn't have WMP pre-installed on my computer how was I going to listen to music?

      Again, it would be perfectly reasonable for computer sellers to bundle multiple non-MS utilities, including a music player - except that Microsoft has often put barriers in their way making it impractical for them to do so.

      What MS did wrong, and it was done a LONG time ago . . .

      For suitably recent definitions of "Long Ago", like last year at ISO.

  2. That's Surprising... by lag10 · · Score: 3, Interesting

    Their motto is usually "pry it from my cold, dead hands" in regards to these fines.

    Wonder what's with the change of heart?

    1. Re:That's Surprising... by joelmax · · Score: 4, Insightful

      They most likely expected the fine and included it into their costs for running the promo. They probably figured that the amount they would make off the promo would probably offset the cost of the fine enough to make it worthwhile.

    2. Re:That's Surprising... by morgan_greywolf · · Score: 5, Insightful

      Easy. $9 million is not only pocket change to to Microsoft, it's very likely that $9 million < the legal bills to fight it.

      They could pay the lawyers > $9 million to fight it, or they can just pay the fine.

      Either way, the outcome is the same.

      Sometimes you just take the practical way out.

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    3. Re:That's Surprising... by Anonymous Coward · · Score: 5, Informative

      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...

  3. Eurodollar to US Dollar by LostCluster · · Score: 3, Informative

    Given the current exchange rate that's roughly $12,000,000 United States Dollars.

    1. Re:Eurodollar to US Dollar by mikael_j · · Score: 4, Informative

      It's called "Euro", not "Eurodollar". Much in the same way that the swedish currency is called "Krona" and not "Kronadollar" or how the currency used in the UK is called "pound" not "pounddollar".

      /Mikael

      --
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    2. Re:Eurodollar to US Dollar by Anonymous Coward · · Score: 5, Informative

      Yes. But eurodollar is actually a concept that exists in banking and predates the euro. They are dollars held in banks outside of the United States. They were instrumental to the establishment of the dollar as the world reserve currency. But with such similar terms it is not hard to see that people become confused.

    3. Re:Eurodollar to US Dollar by InsertWittyNameHere · · Score: 4, Funny

      In the USA it's called Corona and it's a Mexican beer.

    4. Re:Eurodollar to US Dollar by GreatBunzinni · · Score: 4, Interesting

      To make matters worse, eurodollars are not nor were they ever euros. Eurodollars are regular, plain US dollars that are deposited outside of the US's jurisdiction and therefore out of the control of the US's central banking system. So I guess someone heard that new term somewhere and didn't had time to know a bit about it before spreading it around. To put it in other words...

        "You keep using that word. I do not think it means what you think it means."

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  4. "Anti-competitive" by brian0918 · · Score: 5, Insightful

    I have never understood why a company should consider the detriment to its competition when pricing its products. Can anyone explain this to me? Should a person or organization be free to set the price of its products, whether too high or too low, and likewise be free to succeed or fail based on its actions? Isn't any answer besides "yes" an indication that people have a right to the product. Either that, or one would have to argue that people were somehow coerced into buying the product.

    1. Re:"Anti-competitive" by LostCluster · · Score: 4, Informative

      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.

    2. Re:"Anti-competitive" by Winckle · · Score: 4, Informative

      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.

    3. Re:"Anti-competitive" by gravesb · · Score: 3, Informative

      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.

      --
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    4. Re:"Anti-competitive" by brian0918 · · Score: 3, Insightful

      It's under German law, that the supplier and retailer can't agree on what the retail price will be.

      But isn't that absurd? Isn't the entire concept of trade that the buyer and seller freely agree to the price of their product? If a store demands a company sell a product to them at a certain price in order to get placement in the store, the company is free to agree to the price or not. And vice versa. And a customer is likewise free to buy the product or not. Unless the company was coerced, or the retailer was coerced, or the customer was coerced, what is the problem here? Whose rights are being violated?

    5. Re:"Anti-competitive" by Insanity+Defense · · Score: 5, Informative

      But isn't that absurd? Isn't the entire concept of trade that the buyer and seller freely agree to the price of their product? If a store demands a company sell a product to them at a certain price in order to get placement in the store, the company is free to agree to the price or not

      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.

    6. Re:"Anti-competitive" by Hermel · · Score: 3, Insightful

      A law that forbids price fixing leads to lower prices for the consumer as it allows different vendors of a product to compete against each other. However, this also means that the producer looses some of its control over his products.
      Most European countries consider this a small price to pay to get the lower prices. Especially if the profits of overpricing go abroad anyway. :)

  5. Measly 9 million Euros by Junior+J.+Junior+III · · Score: 4, Insightful

    I have no idea what taxes are like in Europe, but I'd have to imagine that that's probably significantly less than the amount of sales tax collected on the sale of those licenses. At that point, it's just another minor cost of doing business. No wonder MS didn't feel a need to appeal.

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  6. 9m euros = cheap by gcnaddict · · Score: 3, Insightful

    Challenging a 9m euro fine would be more expensive (lawyer fees) than just eating the fine, so I can understand their decision.

    It doesn't mean guilt... but they might be guilty anyway, so meh.

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  7. It will take them a shole 3 hours to recoup by blind+biker · · Score: 4, Informative

    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.

    --
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  8. Cheap by Kynde · · Score: 5, Insightful

    If parking tickets where 2cents I could park where ever I'd like. I think the same holds for Microsoft in this case.

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  9. From the Bundeskartellamt by comm2k · · Score: 4, Informative
    For all of you wondering why Microsoft was fined. Linked in the article.. but who reads that anyway?

    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