So business beats politics every time? On Monday, the EC and Microsoft revealed their latest comments in the long-running dispute that has pitted the House that Gates built against Europe’s competition regulators. The latter, despite being egged on from the sidelines by rivals whose unifying characteristic is that they are ‘not-Microsoft’, may have taken a step backwards.

Certainly the tone and tenor of its challenge to Microsoft has softened, one suspects due to the legal tenacity of the boys (and girls) from Redmond and the technical complexity of the issues at hand. Microsoft’s attitude all the way has been marked by an absence of panic. Presumably, having fought and won similar cases in its home US market, Europe looks like a less intimidating adversary.

Even with the array of legal measures and punishments at its disposal, it has been noted here in the past that a solution cannot be forthcoming without Microsoft’s say-so (see ‘Bill Gates: American hero’).

Where’s Sancho?
From the beginning of the current clash, Europe’s approach was certainly bullish. Indeed, in the person of Mario Monti, the former Competition Commissioner with a flair for self-publicity who initiated the suit,  Europe had found its ‘Don Quixote’ figure. Admirably attempting to win where others had failed, there was always the lingering doubt over Monti’s ability to deliver.Shades of ‘gesture politics’ being applied to competition policy.

Monti’s successor, Neelie Kroes, tried to keep up the pretence of a fight between equals but there was a wavering edge to her statement on Monday: “I am happy that Microsoft has recognised certain principles which must underlie its implementation of the Commission’s Decision. I remain determined to ensure that all elements of the Decision are properly implemented. This includes the ability for developers of open source software to take advantage of the remedy.”

Leave my windmill alone
The latest concessions proposed by Microsoft ahead of last week’s deadline cover workgroup server protocols, interoperability issues and royalty-free or royalty-fee software licensing. While Microsoft may not welcome these concessions, it hardly sounds contrite or, for that matter, bothered.

“In order to resolve some complex issues over the past few weeks, we’ve made some tough concessions,” said Steve Ballmer, ceo of Microsoft Corp, on Monday. “We take our responsibilities in Europe very seriously, and will continue to focus on fulfilling all our obligations in every way we can.”

“We worked to be creative in enabling developers to work with our technology together with open source software, yet still protect our intellectual property. Our proposal addresses this objective,” added Brad Smith, Microsoft’s General Counsel. “While we have not reached agreement with the Commission on whether open source developers can go even farther and publish the source code that implements our technology, we are comfortable turning to the courts for guidance on this issue.”

Next round
While Microsoft has said that these changes will be implemented on a worldwide basis, rather than just within the markets falling under the EC’s remit, the Commission for its part is set to allow others in the industry to ‘market test’ Microsoft’s proposals in the weeks ahead.

Some fear that the market test mechanism will allow Microsoft’s rivals to see further competitive advantage under the aegis of the EC. This might yet take the dispute to a new level.

Likewise, the Commission hinted on Monday that it will pursue Microsoft further if the software giant’s appeal for an annulment of the December 2004 decision (see ‘Microsoft 1, Europe 1’) against Microsoft’s practices is turned down. That decision late last year upheld the Commission’s original March 2004 ruling against Microsoft.

So this could yet run and run. Ominously, Microsoft looks better prepared for any race that lies ahead. Europe, by contrast, appears deflated and not a little but confused.
Jim Chalmers