Alberto Mingardi's
2004 Blog Archive
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Link to 2007 Archive

	Habeas Corpus and Microsoft	27 DEC 2004
	There's a Happy Ending When the Market Writes the Book	13 DEC 2004
	The Best Book on Competition in Europe	25 NOV 2004
	Hands off my CD collection!	15 NOV 2004
	On "Nickel Neelie"	05 NOV 2004
	EU Antitrust is Anti-Consumer	27 OCT 2004
	In Cola Wars, a Pyrrhic Victory for Pepsi	25 OCT 2004
	EU Antitrust is Anti-Consumer	18 OCT 2004
	Two Cheers for Mr Zoellick	07 OCT 2004
	This oracle says the deal will happen	27 SEP 2004
	Airbus Subsidies	24 SEP 2004
	Experience Counts	20 SEP 2004

Habeas Corpus and Microsoft
27 DEC 2004 - Bo Vesterdorf, president of the court of first instance of the European Union, denied Microsoft's request to freeze the sanctions that were imposed upon Redmond's colossus as a result of Mario Monti's ruling in March.

Microsoft, the judge said, had failed to prove it would suffer "serious and irreparable damage" if the sanctions or "remedies" were implemented at once.

Of course, very little is "irreparable" for a company that sits on a cash mountain $50 billion high, but this is far from being a juridical criterion. If I steal a millionaire's wallet, but there's only a hundred bucks inside, since so to speak "he can afford it", this doesn't make me a honest man.

The whole European decision against Microsoft is setting a precedent (as Rich Sherlund from Goldman Sachs highlighted in his analysis) which will turn out to be ultimately harmful for consumers.

But as far as the freezing of the sanctions is concerned, we should say that this was but a rational and humble request on the Microsoft's part. The appeals judge will be the first independent judge Microsoft will meet in the course of this dispute. So far, the Commission has been plaintiff, jury, and judge. Shouldn't we wait until an independent stage of judgment is reached, before implementing sanction? Isn't it just judicial civility?

As Istituto Bruno Leoni's Carlo Stagnaro trenchantly notes on Tech Central Station, "there seems to be no such thing as presumption of innocence in Europe, at least for large corporations".
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There's a Happy Ending When the Market Writes the Book
13 DEC 2004 - The long soap opera of the PeopleSoft's takeover by Oracle has happily came to an end. PeopleSoft announced it accepted Oracle's offer, opening the door to the takeover.

The operation got the green light from Commissioner Monti a few weeks ago, and so, this time, it was stakeholders, not bureaucrats, who have decided how happily ever after they are to live.

I have a very simple question for antitrust's enthusiasts: Isn't this simply how it should always be? Forgive me, but what's wrong with leaving the market to decide?

This time freedom of choice, and so freedom of contract, freedom of buying and selling when and how stakeholders want, struck a small victory.

But many more battles are to fight. We are still waiting for the Court's verdict on Commissioner Monti's decision that stopped the merger between GE and Honeywell. Stay tuned.
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The Best Book on Competition in Europe
25 NOV 2004 - A few days ago, I was asked by a friend what I regard as the best book on competition currently available in Europe. My answer was, quite shocking my Anglo-Saxon friend, that it's a French book written by a French economist. I'm speaking of "La Concurrence", written by Pascal Salin. It is a slim book, but it ought to be translated into English and, I hope, Italian. Salin is a clear writer and a sharp mind. He dissects the myths of perfect competition, that so perniciously infect European competition policies, with the precision of an entomology. To my knowledge, this book is truly the best treatment of the subject of competition from an Austrian point of view. For those who cannot read French, I suggest to give a look at least to this path-breaking essay by professor Salin on cartels and monopoly: "Cartels as Efficient Productive Structures". It's an eye-opener, and should be read by anyone interested in competition policies.
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Hands off my CD collection!
15 NOV 2004 - Sometimes for sensible policies, it is difficult to gain consensus. Especially from market competitors! The European Commission faces a legal challenge over its approval of the merger between Sony Music and Bertelsmann Music Group: a group of independent record companies argues the Commission failed in its "responsibility to promote competition, consumer choice and diversity" when it approved the deal. Brussels ruled in July that Sony and BMG could merge, after acknowledging that it did not have "sufficiently strong evidence to oppose the deal". This may sound funny, but it reflects well the world we are living in: a world in which "competition, consumer choice and diversity" are supposed to be supplied by regulations, instead of pursued by consumers in the market. It is no government's business to guarantee "diversity" in the music market: consumers are grown up enough to decide by ourselves what they want - and what they do not want - to listen to. Their taste may not always be best. In this world, you have people that prefer Eminem to Beethoven. True enough, but is government's business to change people's preferences? This is what the companies attacking the merger of Sony and Bertelsmann are really seeking.
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On "Nickel Neelie"
05 NOV 2004 - "Nickel Neelie", the commissioner-appointed for competition, is accused of having blurred the lines between business and politics, as the Wall Street Journal reports (subscription required). I am afraid that such a situation is simply the rule in places like Europe, where the market is so far from being free, and so politicized, that a successful businessman cannot avoid to cross his or her path with the state. For what is worth, I completely share the judgment of Karel van Miert, Mr. Monti's predecessor as EU competition commissioner: "She knows perfectly well how things are in the real world". Mrs. Kroes could be a regulator respectful of the rules of the market. This is a rare commodity in Europe, and the EU Commission should take advantage of it.
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Commission Wisely Avoids a Losing Battle over Peoplesoft
27 OCT 2004 - Today is a troublesome day in Brussels, but there is good news, too. The European Commission has paved way for Oracle's takeover of PeopleSoft.

The commission was unable to find "sufficient evidence of competitive harm" in the takeover proposed by Larry Ellison's company. Now, this is not to say that the takeover will come: "PeopleSoft issued a statement after the commission's announcement", informs Simon Taylor of ComputerWeekly.com, "saying its board of directors will review the decision's implications. The company reiterated that PeopleSoft's board "has carefully considered and unanimously rejected each of Oracle's offers", including the current offer of $21 (£11) a share".

Fair enough, but it should be stakeholders, not Brussels' bureaucrats, to have the last word. Nevertheless, what is particularly interesting is that the New York Times and the Financial Times both reported on Tuesday that the Commission's lawyers had opposed the idea of blocking the takeover as they thought this would not withstand an appeal by Oracle in the European Court.

This is consistent with the fact that several of the Commission's decisions over mergers were disputed and ultimately rejected by the Court of First Instance (for a detailed analysis of this phenomenon, see this PDF file). So, jurisprudence matters - and if it contains and humbles the regulators' conceit, this is good news.
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In Cola Wars, a Pyrrhic Victory for Pepsi
25 OCT 2004 - Last week, Coca-Cola settled a five-year EU antitrust case by promising to scrap retail discounts and by agreeing to share more display space with rivals.

According to the Commission, the settlement is to increase competition in the soft-drink market: in Europe, Coca Cola still holds near-50 per cent share. PepsiCo, which complained to the EU about Coke's sales and marketing practices in the late 1990s, has less than 10 per cent. Once more, as it is easy to see, Commissioner Monti intervened to protect a less competitive producer, rewriting by so the verdict of the market, that is: of the consumers.

Nonetheless, SuperMario declared that the aim of the settlement was to let consumers choose what to buy "on the basis of price and personal preferences, rather than pick up a Coca-Cola product because it's the only one on offer."

These sound like nice and sensible words. But let me quote, from a website, the essence of PepsiCo's complaints:

PepsiCo has consistently contended that it faces unfair barriers to competition in the market for cola drinks in Europe, where its market share is far smaller than in the United States. The company has complained that rivals have been shut out because shoppers are drawn to the Coke rack without bothering to look at rival offerings elsewhere in the store.

It seems that this antitrust judgment is based upon the fact customers do not invest enough time, while shopping, to give a closer look to other Sodas than Coca Cola's ones. What could a rational mind infer from this very fact? That maybe, just maybe, from experience they like Coke better than Pepsi. After all, the market conveys information. If X consumers buy Soda A, and Y consumers buy Soda B, and if X>Y, is there any possibility that Soda A may be closer to the tastes of European consumers? But it seems the Commission doesn't bother with implausible speculations such as these.

What is going to happen now? Coke will scrap all rebates that require retailers to buy the same amount of Coke products or more each time. It also will no longer require that a customer who wants to buy best-selling regular Coke or Fanta Orange also take less-popular brands, or offer rebates if they do or reserve shelf space for them. All these business strategies are completely legitimate, and are going to be unjustly outlawed. Let me say that I actually like Pepsi better than Coke - but this unfair political protection, accorded to Pepsi, is not going to do good to the producers of my favorite drink. True competition, not state-granted privileges, is what they need to develop true empathy with European customers.
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EU Antitrust is Anti-Consumer
18 OCT 2004 - Helen Disney, one of Europe's most perceptive think tankers, recently published an enlightening op-ed in the Financial Times concerning the problems with European antitrust regulations.

She correctly points out that "Europe's attitude towards anti-trust law, competition and innovation has repercussions that go beyond the software industry".

She also rightly underlines how "US law identifies competition and consumer benefit as the priorities when dealing with anti-competitive behaviour. Europe, by contrast, has focused on competitor welfare, rather than the welfare of consumers".

To be sure, US antitrust regulations are not perfect either. The Monti crusade against Windows Media Player resembles, in some way, Judge Jackson's ferocious fight against Internet Explorer that was at that time bundled into Windows (for extensive coverage and acute analysis, see the Mises Institute's website.

Still, I won't dispute that the relevant difference is that the Microsoft case in the US is over, whereas in Europe it will take a few years to be solved. Whenever Microsoft wins or loses, it will have been forced to waste resources in lawsuits that would have otherwise been spent giving consumers better products. The economic nonsense of antitrust laws, mixed with European bureaucracy, makes a dangerous cocktail.
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Two Cheers for Mr Zoellick
07 OCT 2004 - On Wednesday, U.S. Trade Representative Robert Zoellick said Wednesday that the U.S. is filing a World Trade Organization dispute-settlement case against the European Union regarding "billions of dollars in unfair subsidies provided to Airbus by European governments".

This is coming after the US have been trying hard to convince European regulators to cut the amount of subsidies they pass to Airbus. With no success. Mr. Zoellick stated that: "we urged the EU to agree that neither of us should provide new subsidies to aircraft manufacturers." Two cheers for Mr. Zoellick! The massive amount of subsidies, money flying from European taxpayers' pocket to Airbus, is one of the great scandal of the European Union.

Rectifying this situation is an absolute priority. Also, Airbus benefits a lot from "launch aids", which are given to them as if it was an "infant industry": well, first of all, it is just 35 years old (not really a baby, so). Second, the idea of protecting "infant industries" is truly fallacious - as Murray N. Rothbard demonstrated in his beautiful The Dangerous NonSense of Protectionism. So, this time, the US are actually doing the interest of European tax-payers, who do not want to be taxed for subsidizing Airbus. As one of them, let me thank Mr. Zoellick.
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This oracle says the deal will happen
27 SEP 2004 - It is most likely that the EU will decide on the takeover of PeopleSoft by market rival Oracle by the end of October. It seems that Commissioner Monti wants to have the last word of that - as reported by The Wall Street Journal (subscription required) and AFP.

Such a takeover is said to create a "duopoly" between Oracle and SAP over a broad range of the business software market. Still, the deal got the green light in the US, where judge Vaughn Walker said that the DOJ was wrong in believing that such an acquisition will threaten competition. According to the Financial Times (Sept 23), the Commission this time is likely to clear the deal, in spite of the investigations it has long been pursuing. This is because a different decision, the EU regulators realize, won't be able to survive a legal challenge. If confirmed, this is good news.

Perhaps the overwhelmingly negative (from the Commission's point of view) results of appeals cases against Commission decisions during the last few years has led regulators to soften their approach. Being more respectful of the market could only improve the reputation of the EU Commission.
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Airbus Subsidies
24 SEP 2004 - State aids for aircraft buildings are once more on the political agenda, and became of disagreement between the United States and the European Union. The US government, said US Trade official John Veroneau, wants to "bring an end to any new subsidy for the development or production of large commercial aircraft". Airbus, in Europe, benefits from extensive "launch aids", which basically finance its R&D. The Wall Street Journal (subscription required) informs us that the negotiations are far from being reaching a substantial agreement.

This is almost the rule in our time, when we cultivate the illusion that free trade should be "multilateral": i.e., that tariffs are part of a game in which each state could legitimately retaliate against the others. In this scheme, trade is not beneficial per se: it is beneficial just insofar country B is not imposing on goods produced by country A a tariff higher than the one country A is imposing over the good country B produces. It seldom crosses the mind of our politicians that free trade is beneficial per se - for consumers. This is the story taught, in recent time, by Estonia's unilateral trade liberalization.

Getting back on Airbus, the fact that US government is subsidizing Boeing is not excuse to Brussels to use Europeans' money to fund Airbus's new aircraft. Whatever happens in Washington, it is our American friends' business. We, European citizen, have no interest whatsoever in being taxed to subsidize aircraft building, by so affecting the output of this particular market. This is the message we should send, loud and clear, to the new European Commission.
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Experience Counts
20 SEP 2004 - In recent days, European media have talked a lot about newly appointed Commissioner Kroes' alleged 'conflict of interest'. Mrs. Kroes has been on the board of several prominent businesses - so, in addition to her first class experience as a regulator, she has in her curriculum quite a few years as a very prominent business woman. Because of this fact, as the Wall Street Journal reports (subscription required), she will be asked "to disclose her financial assets, which include stock options accumulated from her time at the various companies, raising concerns that the commissioner-to-be will be making decisions that could affect her income". This very discussion - as Carlo Lottieri noted in a comment for Italian daily Il Giornale - shows how interventionist the European approach to competition is. Kroes can be suspected of a conflict of interest just insofar as her job is understood as the job of regulating, planning, and 'rectifying' the output of the market. Antitrust as an active force intervening in the market, to achieve ends of its own. But Mrs. Kroes's job, if she has the courage to do it, should be exactly the opposite: she should destroy such an apparatus, and use the power she enjoys in Brussels just to opening up Europe's market to a wider degree. Conflicts of interests, and corruption, are the consequence of unnecessary interventionism, which makes the verdict of competition irrelevant, because politics has the last word. Mrs. Kroes will have to power to change this. The recent rumors on her person teaches her why she should.
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