Users call for government action on licence changes

As businesses assess the true cost of Microsoft's decision to impose new licensing terms, Computer Weekly sums up the steps firms...

As businesses assess the true cost of Microsoft's decision to impose new licensing terms, Computer Weekly sums up the steps firms can take to protect themselves.

Microsoft's new licensing arrangements were described as unfair and outrageous in responses to an exclusive survey of the Computer Weekly 500 Club, an invitation-only forum for IT directors from the 500 biggest UK companies.

The survey also showed that 85% of IT directors believe the Government should take action against Microsoft under general competition legislation. But if the Government is unwilling to step in, what action can IT users take to oppose the changes in software licensing terms?

Competition law expert Edward Pitt said there are two routes through which companies can challenge Microsoft's dominance in the marketplace.

The first, and most complex, would be to seek a court injunction to prevent the software giant imposing the new terms on the grounds that it is abusing its dominant position, he said. However, the costs and effort involved for a single company in such a process mean that the second route, that of taking complaints to one of the major competition authorities, would be a much more practical option.

The main body overseeing competition in the UK is the Office of Fair Trading (OFT) and worried users can complain under what is known as the Chapter II prohibition of the Competition Act, which is designed to protect UK businesses from becoming the victims of others' anti-competitive behaviour.

The Act's prohibitions came fully into force in March 2000 and firms that break the law could risk being fined up to 10% of their UK turnover. Pitt explained, "The OFT could look, for example, to see whether the new pricing is so excessive that it bears no reasonable relationship to the cost of providing the products."

It could also see whether this is an unlawful exploitation of the fact that customers are dependent on Microsoft products, Pitt said.

The Chapter II prohibition covers abuse by one or more companies of a dominant position in a market. The OFT uses a two-stage test to determine this prohibition. The company being investigated must be in a dominant position, and there must be evidence that it is abusing that position.

An OFT spokesperson said, "We welcome complaints from anyone who suspects the rules are being broken. You can complain in writing or by telephone and your identity can be protected if there is good reason why this is necessary." So complainants concerned about the disclosure of their identity should say so at the earliest opportunity. Users will be asked for evidence to support their complaints.

In determining whether or not a company is in a dominant position, the OFT will look at its market share. Although this varies from case to case, as a general rule a business is unlikely to be considered dominant if it has a market share of less than 40%. Microsoft market share of desktop operating systems is more than 90%.

A company of Microsoft's size would be unlikely to take this type of challenge lying down. Pitt said, "Microsoft will have thought about all these things and gone through them very carefully."

All the more reason to do your homework before launching a challenge.

He also advised that users stand a better chance of success if they pool their resources and use the collective power of user groups. The most important thing, however, is that users should be prepared to collect plenty of evidence before taking on the might of the Gates empire.

Pitt said, "You can't just put your hand up and say 'this is outrageous', you will have to produce a prima facie case for the OFT to look at."

Microsoft was not available for comment. It has previously denied any abuse of its market dominance.

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