EC to Microsoft: We just don’t trust you

2000-07-06

Just two days after denying the Wall Street Journal news report claiming that the European Commission would block Microsoft’s investment in a UK cable company, both parties confirmed on Friday that this was indeed the case. According to The Nando Times Microsoft no longer plans to up its stake in Telewest Communications plc, a deal which would have seen the giant investing $3bn to gain control of the company.

Microsoft has never been cagey about its real intentions when investing in cable and other communications software. The plan has always been to develop new markets for the sale of Microsoft software and products: the company knows full well that the cash cows of the PC market will dry up one day. However we are talking about one of the biggest corporations in the world here, and it has got a bit of a reputation for being over-bullish. Hence the anti-trust case which is still running its course, and hence also the stance of the EC which is determined to do what it can to ensure Microsoft does not engage in anti-competitive practices.

It is easy to take a pop at Microsoft but at the same time it is worth considering the other side of the argument. In blocking the deal the EC has effectively prevented a US firm from making a $3bn investment in Europe. This is an indication of the kind of muscle that the EC now holds – without the details of the case we can only hope that the decision was made wisely, and quite clearly it is not something that can happen too often before it starts to damage the economies of the member states. Equally clearly, the EC is so fearful of the monopolistic might of Microsoft that it is prepared to step in and act.

The message that comes through loud and clear is that it is not over yet for the software giant. We have said in the past how the company’s every move would be subject to the most intense scrutiny – having been found guilty of abusing its position (albeit subject to appeal), most onlookers will watch each deal with no little cynicism. The failure of the Telewest deal is indicative that the EC has teeth, and that Microsoft’s corporate future can be compared to walking on eggshells. Bill Gates has already expressed his worry that the DOJ ruling will limit his company’s ability to innovate. Even before the antitrust case reaches a conclusion, it looks like the chickens are coming home to roost. The road ahead could be rocky.

(First published 6 July 2000)