Windows refund - the next episode: Thoughts on a 2007 pan-European action

LXer Feature: 28-Feb-2007 Linux on OEM desk/laptops is a hot item these days. Dell started to ship corporate desk/laptops without Windows pre-installed lately. Nonetheless, this is too little and too late, costumers should be able to buy any lap/desktop without Windows pre-installed. Furthermore, the secret trade deals Microsoft made with the OEM's, which effectively make it impossible for / forbids OEMS to ship desk/laptops without Windows - are forbidden. Therefore, a new pan-European Windows refund action should be started. In this article, I will share my new insights on the legal aspect of this action, since there are a lot of new things I found out after the last article I wrote on the subject. After that, I'll show my plan to do something about it. In short, it reads: Call aunty Neelie and try to get rid of our almost criminal uncles Bill and Steve.

Legal frame of reference

In my previous article on this topic, I still had the assumption pre-installing Microsoft Windows with a desk/laptop can be interpreted as forbidden tied sales. However, tied sales are not always forbidden; and while it's sure pre-installing Windows is tying sales, it's unsure if this belongs to forbidden tied sales or not.

Therefore, we should rephrase our complaint, and try to make it plausible Microsoft and the OEM's break the European competition laws. The best instruments we have for this, are the famous laws 81 and 82 of the EU treaty. So, there we go:

Article 81 of the EC Treaty (ex Article 85)

• 1. The following shall be prohibited as incompatible with the common market: all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the common market, and in particular those which:
  
  
  
  • (a) directly or indirectly fix purchase or selling prices or any other trading conditions;
    
    
  • (b) limit or control production, markets, technical development, or investment;
  • (e) make the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts.

© European Communities, 1995-2007 Reproduction is authorised, provided the source is acknowledged, save where otherwise stated.

• If we look at term (a), we could say Microsoft fixes the prices of OEM versions of Windows which are sold to the End-Users, by means of their contracts with the OEM's. This is, if we assume the OEM is a 'reseller' of the OEM version of Windows, and doesn't add any value to the software, which it probably doesn't.
• Looking at term (b), I immediately think about how Microsoft tried to forbid Dell to ship non-OS lap/desktops^[1]. Therefore, this agreement limits / controls the market, and also technical development and investment.
• The clause of the agreement with Dell in which Microsoft stated, Dell wasn't permitted to ship desk/laptops without OS, looks like a supplementary obligation which has no connection to the subject of the agreement - at least to me. Therefore, it infringes rule (e).

Now, the 'evidence' we got, that Microsoft forces OEM's to only sell desk/laptops with an OS, dates back from 2002. Nonetheless, we can assume these clauses still exist in the agreements Microsoft makes with the OEM's today. However, we can't find that out, since we aren't able to read those agreements, because they contain 'secret information', Microsoft will probably say. 'If Dell knows HP pays less per Windows OEM license, they would be stupid to pay more, and therefore the agreements are trade secrets, and part of our IP', I already hear Microsoft say. Because of these assumed trade secrets, they can throw in any dirty clauses into these agreements without anyone knowing it.

It's time this changes, and at least the Competition Directorate-General should have insight in this agreements, to make sure they are legal under European law. That's difficulty number two: Those agreements are probably reached in the US, so what happens if they infringe on European laws? I can't answer that question at the moment, though I know Microsoft OEM license agreements to parties (OEM's) in the EU are between the OEM's and 'Microsoft Ireland Operations Limited'. Most of the OEM's are based in the United States however. Enough about article 81, let's move on to the next EU treaty article, number 82. It looks a lot like article 81, but is a tiny bit different:

Article 82 of the EC Treaty (ex Article 86)

• Any abuse by one or more undertakings of a dominant position within the common market or in a substantial part of it shall be prohibited as incompatible with the common market insofar as it may affect trade between Member States.

  Such abuse may, in particular, consist in:

  • (a) directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions;
  • (b) limiting production, markets or technical development to the prejudice of consumers;
  • (d)making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts.

© European Communities, 1995-2007 Reproduction is authorised, provided the source is acknowledged, save where otherwise stated.

HOWTO: TODO

• Consumers should be able to buy a lap/desktop without Windows. This means:
  • OEM's should offer lap/desktops without Windows, or
  • OEM's should have a return policy, which enables customer to decline the Windows EULA on a desk/laptop with Windows pre-installed. After they decline it, it should be a straigt-forward process to receive a refund for the unused Windows license. Moreover, this process should be free of whatever cost for the customer. That might sound logical, but at the moment, some OEM's enable a refund, but the customer pays for transportation of his lap/desktop back and forth to the factory, and the 'technical cost' of the removal of the Windows software and the sticker, if present. The customers ends up paying more for this removal costs, than he receives as a refund, so effectively, the refund costs money! This can't be the goal of a refund.
• Consumers should know how much a Windows OEM license actually costs them. This is because, in my opinion, Windows is a separate product from the computer, though hardware-parts like hard disks are not. On the other hand, people might ask why they can't, for example, receive a refund for a wireless card they don't use, if they return it. That's a tricky issue, but it should suffice to say, almost all hardware makers aren't convicted for anti-trust, and don't have a dominant / monopoly position.

Conclusion

• C|NET news, May 3, 2002, Joe Wilcox , 'Can Microsoft play nice with PC makers?'
  "For example, to receive lucrative marketing discounts--$10 per copy of Windows, down from $12 last year--they must adhere to strict hardware configuration guidelines and agree to ship an operating system on every computer they sell."
• WindowsITPro, Aug 15, 2002, Paul Thurott, 'Dell: No-OS PCs Aren't Designed for Linux'
  "Dell previously offered no-OS PCs and workstations to large customers, but Microsoft's new licensing policies, which went into effect August 1, forbid this arrangement."
• Slashdot, Aug 10, 2002, 'Some SysAdmin', 'Dell No Longer Selling Systems w/o Microsoft OS'
  "Effective 8/26 - New Microsoft contract rules stipulate that we can no longer offer the "NO OS" option to our customers beyond September 1st."