Microsoft to be fined up to 2.6 M USD by European union as MSFT has failed to give complete and accurate information about the Windows O/S. Rival companies claim that it deters them from providing server software compatible with Windows.

Is it right for any union to fine a company ? Should MSFT  provide all the information that is needed ? Why should it provide the information ? In the times to come, MSFT itself might want to get in to other products which might help them cement their ties further with its customers. Who decides whether a company is misusing the power to skew the market ? On what basis can one decide that a firm is exploiting the customer / would exploit the future in the case of status quo?

This made me start this blog post.
When a lot of customers start using a product, the power automatically shifts to the side of the product owner AND particularly so, when the customer’s other services are linked closely with the product. Any product which commands a significant share in the market has to maintain a fine balance between IP of its product and the community development around its product which requires taking an open /collaborative stance.

The lack of a good user interface for O/S gave a lot of scarcity power to MSFT. It dominated the market with a premium pricing and gave the world what it wanted . The transaction becomes important when a large number of people become part of it with only one seller present in the transaction. MSFT bargaining power began to dominate so much so that it started wreaking havoc with the development of the market itself. The release of free IE browser was a classic case of Microsoft throttling the market which to this day has created a monopoly for MSFT in the browser market.
Browser act is a case in point for firm under a significant clout thwarting the market. Hence there is a case for a regulatory body to oversee such market actions for a healthy ecosystem.

But the moot point is - How to decide which action is monopolistic in nature or a tactical strategy employed by the firm? For this I do not have any forthright answers as I type. One thing is that it needs to be dealt case by case. But is there some framework that can be used as a starting point . I recall vaguely that market share could be a basis of deciding the monopolistic nature of firm.

Let me take a detour now and write about the current situation which MSFT is facing

With the marginal product strength increasing(Linux ) and market embracing open source technologies, MSFT has lost the scarcity power it used to possess. Typically any firm in this position faces two paths. Join the community and help the development of community by making its product more accessible to developers OR Maintain the IP and squeeze the profits from the same by making the rival vendors difficult to build applications on the OS
MSFT seems to have adopted the second route which in the short term might bring revenues, but ultimately become the reason for its demise. In economic jargon , the problem can be termed as Inside Information Syndrome. If a product gives away the Inside information of the product, it helps build the market , but ultimately it might benefit the firm in the larger context.  However if the firm does not disclose ,the sellers always hunts for a better price and better product .George Akerlof’s used car market is a brilliant example of a market being thwarted by “Inside Information Syndrome”

In my opinion, MSFT would be hit by IIS more sooner than later(if status quo is maintained) and penalty from IIS would be much larger than any EU commission fine as it would hit right at the heart of MSFT business. So, Monopoly fees or No Monopoly fees, the time has come for MSFT to  get out of IIS -not Internet Information Server BUT out of Inside Information Syndrome