The EU's Wise Microsoft Ruling

For almost 15 years, U.S. regulators have been chasing Microsoft Corp. (MSFT ), inveighing against its monopolistic behavior and bringing heavy-duty lawsuits, but doing little to dent the company's market power. Now the European Union is taking on the software juggernaut. On Mar. 24, European Competition Commissioner Mario Monti hit Microsoft with a fine of more than $600 million while mandating that the company offer a version of its operating system that doesn't include a media player, and requiring that Microsoft open up its code so that other companies can connect more easily with computers running Windows.

The EU should be commended for its efforts, especially since it seems to have learned from the unsuccessful U.S. efforts to restrain Microsoft. In particular, Monti explicitly made protecting innovation a crucial part of the argument for his decision, something the U.S. Justice Dept. did not do until too late in its case against Microsoft. Looking at innovation is essential: In fact, in the short run few consumers gripe about having applications well-integrated into the operating system, since it makes life easier and cuts down on glitches. But the longer-run danger is that entrepreneurs will be less willing to bet on innovative software for PCs -- including new forms of Web search -- if the end result is that their bright ideas are absorbed by Windows.

The EU ruling strikes the right balance on the regulation of the software giant. It didn't call for Microsoft to be broken up, or even force the company to keep future innovations out of its operating system. Instead, the ruling can be likened to putting some obstacles in front of a moving truck -- the driver has to slow down and steer more carefully but doesn't have to stop. And that, in the end, is the right way to deal with Microsoft.

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