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● 09.10.11

●● Cablegate: European Commission Worried About Microsoft’s Browser Ballot Screen Being Inappropriate

Posted in Antitrust, Cablegate, Europe, Microsoft at 10:02 am by Dr. Roy Schestowitz

Summary: A look at the real views of regulators, to whom Microsoft was ‘selling’ the idea of false “choice” (where Internet Explorer is already installed by default)

THE FOLLOWING Cablegate cable draws attention to several disparate issues, some of which are unrelated to technology. But the part which we found most revealing (¶14) says that “Microsoft’s proposed “ballot-screen” remedy to the Commission’s case against Microsoft’s bundling of Internet Explorer with Windows concluded last Friday (Nov. 13)” and that it “showed some small concerns over screen design, layout, the number of security warnings Windows showed users installing new browsers, and one or two other small issues.”

We actually wrote about those same issues at the time, but we did not know that the European Commission too was sceptical [1, 2, 3, 4, 5, 6, 7, 8, 9]. Inside those posts are some points and arguments from around that time. These mostly got mentioned by Microsoft rivals.

=> 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9

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INFO RUCNMEM/EU MEMBER STATES COLLECTIVE

RUCNMEU/EU INTEREST COLLECTIVE

UNCLAS SECTION 01 OF 03 BRUSSELS 001591

SENSITIVE

SIPDIS

STATE FOR EUR/ERA, EEB/TPP/MTA, EEB/OIA

DOJ FOR CALDWELL HARROP

DOC FOR DAVID DEFALCO

PLEASE PASS TO USTR DAVID WEINER AND FTC J.

PARISI

NOT FOR INTERNET DISTRIBUTION

E.O. 12958: N/A

TAGS: ECIN [Economic Integration and Cooperation],

ECON [Economic Conditions],

EINT [Economic and Commercial Internet],

ECPS [Communications and Postal Systems],

EFIN [Financial and Monetary Affairs], ETRD [Foreign Trade],

EUN [European Union]

SUBJECT: KROES CABINET CHEF ON ORACLE-SUN, BANKING

REVIEWS, NEXT COMMISSION DYNAMICS

BRUSSELS 00001591 001.9 OF 003

SUMMARY

¶1. (SBU) Anthony Whelan, chef du cabinet to

Competition Commissioner Neelie Kroes, told USEU

November 20 that Kroes and DG COMP are carefully

reviewing the complex arguments involved in the

Oracle-Sun merger, and the potential concerns over

Oracle's acquisition of Sun's MySQL open source

database. Key issues Kroes is reviewing include

whether: MySQL's open source nature protects it from

competition concerns (Kroes is skeptical); DG COMP

concerns that Oracle wouldn't support developing

MySQL into a stronger competitor to other existing

lower-end databases; and interest in Oracle

arguments that MySQL technically cannot be scaled up

far enough to compete with some of these databases.

He noted that Kroes and DG COMP officials' minds

"are more open" to Oracle/Sun arguments than they

would be in many SO cases, given the new open source

issues involved.

¶2. (SBU) Whelan said Kroes regretted missing the

recent TEC meeting and continues to value her close

relationships with U.S. competition officials. He

said she has spent a tremendous amount of time on

state aid reviews of the many financial sector

bailout packages member states have enacted during

the financial crisis. He said the Commissioner and

DG COMP have no master plan for the state aid

reviews, and acknowledged the importance of looking

at the cumulative impacts of required actions on the

banking sector. Whelan noted the increasing

possibility that Kroes will be reappointed to serve

in the next Commission, mentioning rumors she could

get the trade portfolio. END SUMMARY.

TEC AND COMPETITION CONSULTATIONS

¶3. (SBU) EconMin opened by mentioning the success of

the recent Transatlantic Economic Council (TEC)

meeting and noting it was unfortunate that

Commissioner Kroes had been unable to participate.

Whelan said Kroes had been looking forward to

participating in the TEC and explaining Commission

reviews of financial sector support packages, but at

the last minute had needed to stay in Brussels to

address some of those very reviews.

¶4. (SBU) EconMin noted the long history of

cooperation in competition policy issues, and

expressed disappointment that the the planned U.S.-

EU competition consultations had to be postponed.

He noted USEU's commitment to continuing to

facilitate close relations between our respective

competition authorities. Whelan said Kroes and DG

Comp feel the same, noting Kroes' subsequent meeting

in India with FTC Commissioner Kovacic, as well as

Deputy Director for Antitrust Nadia Calvino's recent

meeting in DC with DOJ Deputy AAG Molly Boast.

FINANCIAL SECTOR STATE AID REVIEWS

¶5. (SBU) Whelan explained that Kroes has spent a

tremendous amount of time on state aid reviews of

the many financial sector bailout packages member

states have enacted during the financial crisis. He

acknowledged that the results may lead to some

transatlantic disinvestments and pullbacks. The

Commissioner and DG COMP have no master plan for the

state aid reviews, but Whelan agreed the Commission

should probably look at the cumulative impacts of

required actions (such as divestments by ING and

BRUSSELS 00001591 002.10 OF 003

RBS) on the EU and transatlantic banking sector. He

noted the Commission's declared intention when

adopting its restructuring guidelines that measures

should not undermine the EU internal market. He

pointed out that the Commissioner does not insist on

divestment of assets in particular regions (ex. E.

Europe) and in fact wants to ensure member states do

not "close" EU financial markets.

¶6. (SBU) Whelan explained that the state aid reviews

involve twice weekly joint meetings by DG COMP, DG

MARKT, DG ECFIN and the Commission legal services to

examine member state packages. He said when the

crisis hit last year DG COMP quickly received more

resources to conduct the reviews, noting they hired

former bankers and other experts to assist with the

reviews. He added that many of the guarantee and

recapitalization schemes have already been

reexamined at least once, to ensure they are working

and are not market-distorting.

ORACLE-SUN MERGER

¶7. (SBU) After discussing state aids and Commission

politics (below), Whelan turned to the Commission's

investigation of the planned $7.4 billion Oracle-Sun

merger. He said Oracle had requested an 8-day

extension to prepare their written and possible oral

responses to the Commission's Statement of

Objections (SO). This is a positive sign, he said,

that they are taking the Commission process

seriously. He said that some on the DG COMP case

team felt Oracle had been "lazy" in its responses to

requests for information, but agreed Oracle may not

have expected the database concerns, since the early

focus had been on potential JAVA issues. He said

concerns about Sun's MySQL open source database were

brought to DG COMP by questionnaire responses from

other parties over the summer.

¶8. (SBU) Whelan acknowledged that Sun and Oracle are

concerned that the issuance of an SO is a serious

step, since very few mergers with SOs have been

cleared unconditionally, but added that each case is

totally different and that Oracle-Sun presents new

issues for DG COMP in involving open source software

models so extensively.

¶9. (SBU) Whelan understands Oracle's existing

databases and MySQL have different architecture and

target different markets. He noted that Kroes and

DG COMP know the argument that open source software

is by definition "pro-competitive," since the theory

is that everyone has access to it and can contribute

to improving open source programs, but said the

Commission is examining subtle and complex

counterarguments to this. He said that in the

dynamic, real marketplace in Europe, this open

source argument needs to be examined.

¶10. (SBU) Key questions DG COMP is considering in

this case, Whelan said, include: 1) whether the

"global public license" open source nature of MySQL

somehow precludes potential competitors from using

it to develop commercial products that could

eventually compete with OracleQs databases; 2) in

this connection, Oracle's assertions that

technically MySQL cannot be scaled up to compete on

Oracle's high end; and 3) whether Oracle has the

incentive to support development of MySQL into a

stronger program.

¶11. (SBU) These concerns, Whelan said, are to some

extent hypothetical, but then added that the

Commission's merger control powers differ from those

BRUSSELS 00001591 003.7 OF 003

held by DOJ and FTC in the U.S. In the U.S., he

said, agencies can come back to a merger after it

occurs, see the results, and take structural action

if necessary. The Commission doesn't have that

possibility, he continued. The Commission faces an

incredibly high bar for subsequent action, he said

(if it can show an Article 82 violation that can't

be fixed by a behavioral remedy); hence the need for

a thorough review now.

¶12. (SBU) Whelan continued musing about whether the

specific type of open source license MySQL has works

well in practice; he noted that the most successful

open source products often have a commercial

sponsor, (ex. Red Hat), which allows for dual

licensing. The Commission's concern is not so much

that MySQL would be re-privatized, but rather that

Oracle might not provide strong support for the

program. The Commission does recognize, Whelan

said, that strong support for MySQL from Oracle

could make the database a stronger competitor to

Microsoft and other lower-end database providers.

¶13. (SBU) Whelan stressed that, given the newness of

many of the open source issue involved in the case,

"our minds are more open" than they tend to be in

standard cases where an SO has been issued. He said

Oracle has the opportunity to demonstrate answers to

many of the questions raised by the Commission (such

as whether MySQL can technically be upgraded to be a

major competitor to Oracle's existing databases.)

MICROSOFT UPDATE

¶14. (SBU) Whelan said that the 4-week market test of

Microsoft's proposed "ballot-screen" remedy to the

Commission's case against Microsoft's bundling of

Internet Explorer with Windows concluded last Friday

(Nov. 13). He said the ballot screen results (under

which MS will offer a screen with alternate internet

browsers that Windows users can download) showed

some small concerns over screen design, layout, the

number of security warnings Windows showed users

installing new browsers, and one or two other small

issues. Whelan said "we need to explore these with

Microsoft" but implied that they were not major

issues, and reinforced the impression that

Commissioner Kroes sees this case as nearly

resolved.

KROES IN THE NEXT COMMISSION

¶15. (SBU) Whelan said that while three weeks ago

there seemed to be zero possibility of Kroes being

reappointed to the Commission, the Dutch political

dynamic has since changed. Kroes is very media-

savvy in the Netherlands, Whelan noted, and the

Dutch media have begun a campaign to renominate

here. The government is "in the doldrums," he said,

and there is public resistance to sending one of

Prime Minister Balkenede's "party hacks" to the

Commission. Kroes is seen as tough on banks, which

is appealing, he added, and PM Balkenende is now

under some pressure to support Kroes. Whelan

concluded that her chance of reappointment has

grown. (Note: Kroes was subsequently reappointed by

the Dutch government on November 24. End note).

Whelan acknowledged the rumor that Kroes would get

the trade portfolio but said he had no corroboration

of this at all.

Eventually Kores stayed in the Commission (not in the competition part of) and Microsoft now engages in new anti-competitive abuses, mostly using patents. Microsoft cannot help being brutal and cheating while nobody is watching and threatening with fines. █

=> stayed in the Commission

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