Posted on 29-3-2004
Market Ab-users
26.03.2004, by Chris Barton (see photo)
Abusive monopolist - a deliciously colourful term that leaves
no doubt a
company is doing something very, very bad. Our Commerce Commission
isn't
describing Telecom that way, but comes close with "has
misused its market
power, and continues to do so, to prevent or deter competition".
But in Europe the competition watchdog doesn't hold anything
back,
describing software giant Microsoft as an abusive monopolist
while hitting
it with a record €497.2 million ($926.6 million) fine.
"Dominant companies
have a special responsibility to ensure that the way they do
business
doesn't prevent competition on the merits and does not harm
consumers and
innovation," said European Competition Commissioner Mario
Monti. As Monti
points out, such intervention is necessary to restore the conditions
for
fair competition and establish clear principles for future conduct.
If only it were that simple. Both cases illustrate just how
inadequate
competition law is to deal with today's high-tech monopolists.
The EU
action comes after a five-year investigation and is far from
over, with
Microsoft now appealing. Telecom's alleged anti-competitive
behaviour
dates back to 1998 and our doddery commission still has a long
drawn-out
legal battle ahead. Meanwhile, time and technology wait for
no man - so
that when a decision is finally reached it is largely irrelevant.
Witness
the spectacular failure of the US Justice Department to rein
in
Microsoft's monopolistic abuses in the browser wars. The settlement
is
still being hammered out, but the main victim of Microsoft's
dominance,
Netscape, is no more.
Telecom has had similar success knocking out free internet provider
i4free
early in 2001. That case is also wending its way through our
courts and
shows no signs of being settled soon.
The penalties don't work either. If Microsoft is eventually
made to pay
its record fine, it will have little effect on its US$50 billion
cash
reserves.
Similarly, the most Telecom will face in the present action
by the
commission involving its setting retail prices lower than wholesale
prices
for a particular product is a fine of around $10 million - a
sum Telecom
can swallow in one gulp. All of which leads to the unsettling
conclusion
that cheats do prosper and that the big guy will always win;
that the
monopolist weighs the costs of being found guilty of abusing
market power
and realises that no matter what happens it can't lose.
The purpose of competition law is to intervene where there is
market
failure to ensure competition thrives - presumably leading to
lower prices
and more variety for consumers. If government and business are
serious
about that principle, we need an enforcer that is effective
- one that can
move quickly with enough power to make its rulings stick.
Our present regime clearly lacks both those attributes. That
is the effect
of saying "let the market decide" - albeit with the
nuisance of a
toothless watchdog yapping. In telecommunications in New Zealand
and in
software in Europe, the market also seems to be saying: "Monopolies
are
okay."
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