Chris Barton: Two steps ahead of Mr Plod

COMMENT

Abusive monopolist - a deliciously colourful term that leaves no doubt a company is doing something very, very bad.

Our Commerce Commission isn't describing Telecom that way, but comes close with "has misused its market power, and continues to do so, to prevent or deter competition".

But in Europe the competition watchdog doesn't hold anything back, describing software giant Microsoft as an abusive monopolist while hitting it with a record €497.2 million ($926.6 million) fine.

"Dominant companies have a special responsibility to ensure that the way they do business doesn't prevent competition on the merits and does not harm consumers and innovation," said European Competition Commissioner Mario Monti.

As Monti points out, such intervention is necessary to restore the conditions for fair competition and establish clear principles for future conduct.

If only it were that simple. Both cases illustrate just how inadequate competition law is to deal with today's high-tech monopolists. The EU action comes after a five-year investigation and is far from over, with Microsoft now appealing.

Telecom's alleged anti-competitive behaviour dates back to 1998 and our doddery commission still has a long drawn-out legal battle ahead.

Meanwhile, time and technology wait for no man - so that when a decision is finally reached it is largely irrelevant.

Witness the spectacular failure of the US Justice Department to rein in Microsoft's monopolistic abuses in the browser wars. The settlement is still being hammered out, but the main victim of Microsoft's dominance, Netscape, is no more.

Telecom has had similar success knocking out free internet provider i4free early in 2001. That case is also wending its way through our courts and shows no signs of being settled soon.

The penalties don't work either. If Microsoft is eventually made to pay its record fine, it will have little effect on its US$50 billion cash reserves.

Similarly, the most Telecom will face in the present action by the commission involving its setting retail prices lower than wholesale prices for a particular product is a fine of around $10 million - a sum Telecom can swallow in one gulp.

All of which leads to the unsettling conclusion that cheats do prosper and that the big guy will always win; that the monopolist weighs the costs of being found guilty of abusing market power and realises that no matter what happens it can't lose.

The purpose of competition law is to intervene where there is market failure to ensure competition thrives - presumably leading to lower prices and more variety for consumers. If government and business are serious about that principle, we need an enforcer that is effective - one that can move quickly with enough power to make its rulings stick.

Our present regime clearly lacks both those attributes. That is the effect of saying "let the market decide" - albeit with the nuisance of a toothless watchdog yapping. In telecommunications in New Zealand and in software in Europe, the market also seems to be saying: "Monopolies are okay."