MICHAEL GEIST
Thursday, November 8, 2001
Despite extensive media coverage of the Microsoft antitrust affair over the past few years, one perspective has remained surprisingly absent from the analysis: Seemingly content to ride on the coattails of their U.S. counterparts, Canadian competition officials have never established an official public position.
The failure to act has left consumers and competitors vulnerable to the consequences of anticompetitive behaviour and has called into question the federal government's innovation strategy.
With news last week that the U.S. Department of Justice and Microsoft have negotiated a settlement, the risk inherent in Canada's failure to take a stand has become clear. When a change in U.S. priorities yielded a weak settlement universally regarded as a win for Microsoft, Canadians were left with scant protection against future abuses.
The passive Canadian position was always difficult to understand. While the DOJ, nearly 20 state attorneys-general, and European Union antitrust authorities actively investigated and launched actions against Microsoft for abusing its dominant position in the personal computer operating system marketplace, Canadian competition authorities remained silent.
That silence is particularly disappointing considering Microsoft's impact on the Canadian market. Millions of Canadians have purchased computers featuring Microsoft products, while Canadian software companies such as Corel have aggressively challenged Microsoft by offering alternatives to its popular suite of programs. Given the U.S. courts' findings, as well as the close integration between the Canadian and U.S. economies, there can be little doubt that Canadian businesses and consumers have been affected alongside our neighbours to the south.
More troubling still is that Canadian inaction regarding Microsoft is hardly an isolated event. U.S. and EU authorities have launched antitrust investigations into a number of Internet-based businesses in recent months, yet Canadian authorities have sat quietly on the sidelines. For example, both U.S. and EU officials have launched antitrust investigations into on-line travel services, fearful that initiatives such as Orbitz, an on-line travel service jointly owned by several leading U.S. airlines, could result in unfair competition in this burgeoning marketplace.
U.S. officials have also aggressively targeted instant messaging services. Using their leverage over AOL Time Warner during the merger approval process earlier this year, they extracted concessions from the company that will increase the likelihood of openness and interoperability in future generations of instant messaging services.
Most recently, U.S. and EU officials decided to take on the on-line music market. Concerned that the major music labels were attempting to carve up the post-Napster on-line music market for themselves, authorities quickly launched an investigation that was recently expanded to include analysis of contractual dealings between the labels and alternative on-line music services. The alternative services claim that the labels are unwilling to license their music libraries at competitive prices, seeking instead to stifle any new competition by ensuring that the future of on-line music will only include a few label-controlled services.
Ironically, Canadian Industry Minister Brian Tobin, the minister responsible for the embarrassing failure to protect Canadian interests and markets, has said he would make "innovation" a top priority. Although Mr. Tobin seems to conceive of innovation primarily in terms of government-supported universal broadband access programs and increased research support to Canadian universities and colleges, assurances of a competitive marketplace where innovation can flourish is no less important.
Microsoft's past actions were a direct challenge to innovation. The software giant sought to stifle the innovative activities of its nimbler rivals through a series of anticompetitive strategies that centred on the company's control of PC operating systems. The recent settlement, which does little to allay continuing concerns about features embedded in the new Microsoft XP OS and tied to the company's .Net initiative, suggests that this may continue.
While Ottawa's willingness to invest in innovation may have a long-term payoff, its policy approach on key legal issues has got it backward. On matters such as copyright policy, where the government should adopt a conservative, go-slow approach that recognizes the unsettled nature of copyright protection measures, it shows signs of charging toward tough new laws that may alter the copyright balance and curtail innovation. On matters such as technology competition policy, where it should adopt an aggressive approach that protects the competitive environment of the marketplace, it remains mute.
In a global e-commerce marketplace, the impact of the Microsoft case, on-line music, and other emerging e-businesses is obviously not confined to the United States and Europe. Canadians are also directly affected, and thus deserve a more proactive approach from their competition authorities.
Michael Geist is a law professor at the University of Ottawa Law School and director of e-commerce law at the law firm Goodmans LLP. His Web site is http://www.lawbytes.com.
mgeist@uottawa.ca
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