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Tuesday, June 07, 2005
Mysterious Monopolies

The taxpayers' money wasted on chasing Microsoft through European courts is being used on the basis of some pretty strange ideas about monopoly. This was well illustrated on the BBC yesterday when John Humphries called Tesco's 30% share of the UK food market "a monopoly". This definition seems to mean "there's a big market leader around and we like small guys".

Monopolies exist where no-one can come into a market due to some kind of barrier, and the monopolist can thereby exercise undue pricing power. Even owning 100% of the market may not be a monopoly if there is a threat of entry and free pricing. Indeed, every new product under that sun starts as a 100% monopoly.

Microsoft certainly does not have a monopoly, what it does have is market leadership and it both pushes outwards into new innovative areas and drags other players along into new innovations all of which benefit us as consumers through lower prices and better products for all. As a market leader, it also demands that new competitors have to be very very good on prices and features to compete with it. That's good for us too, and keeps governments out of the IT business. As always, competition is a battle of knowledge.

The EU uses taxpayers money to pursue Microsoft in an area it knows nothing about. For consumers, this can only mean one thing, restrictions on the IT business that will mean higher prices, lower innovation and worse products. Time will show how well Microsoft adapts to a thousand agile, clever and aggressive small fry nibbling away at their advantages. They do not have a monopoly on talent.

- Eben Wilson, TPA Editorial Director