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

Posted by hkwint on Feb 28, 2007 3:15 AM EDT
LXer.com; By Hans Kwint, The Netherlands
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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.
Now, let's look at how Microsoft violates this terms.
  • 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.
This article almost claims the same as article 81, but there is a difference: article 81 prohibits certain kinds of agreements between undertakings, while article 82 prohibits the abuse of a dominant market position, and in claim (b) especially in relation with customers. Thinking about this, the following argument came to my mind:
One Windows OEM license costs more per license, than one hundred-thousand licenses cost per license. This is logically, and normal behaviour in a free market. However, this can only be justified if the selling party isn't a convicted monopolist, in my opinion. It can rather easily be understood, this pricing scheme limits production and markets to the prejudice of customers. The less Windows desktops a large OEM sells, the more they pay per Windows license, and the more the consumer will end up paying for his desktop. Since the dominant position the Windows operating system has, it effectively costs the cosumers who buy a lap/desktop with Windows pre-installed money if the OEM would sell desktops without Windows. That's only in practice, not in a legal sense. Nonetheless, the Competition Directorate-General should consider this in my opinion.

HOWTO: TODO

So, though I'm not a lawyer, I think Microsoft and the OEM's might infringe on some European treaty articles. Please notice, in contrary to Microsoft claiming Linux infringes on certain things, I exactly state where they infringe on in my opinion, and how. But, only some real lawyers can find out whether Microsoft infringes or not. As I don't have money to pay some lawyers to find that out, the only thing I can do is ask the Competition Directorate-General to examine my assumptions. Therefore, we could use a complaint Form C. This seems like the proper way to do it to me.
If you think my goal is to convict certain companies, well, you're wrong. My goals are certain demands are met by the OEM's, and those demands are very reasonable:
  • 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.
Now, a 'HP manager says HP is committed to delivering working products', and a desk/laptop without an OS installed isn't a working product. Therefore, people could argument, Windows isn't a separate product. Well, I'm sorry to them, but that's sóóóóó yesterday! Today, I can buy a desktop without an OS, with a formatted harddisk, and use it for years without installing an OS on the harddisk, by means of a LiveCD/DVD a LiveUSB stick, an old fashioned floppy, the PXE netboot protocol, or whatever. Even Windows can be converted to a bootable LiveCD, though the legal status of that is a bit unsure.
Then, all we have to do, is to ask the OEM's to meet those demands! If they don't, we can still call in aunty Neelie. I'll do this the same way as I did the Dutch Windows refund survey I did earlier, only this time I will write to all European 'headquarters', and I'll send all the letters by registered mail straigt away, instead of e-mailing two times, writing unrecorded letters, still having no answer after two months, and then eventually sending registered mail. If there are people willing to share in the cost (about one hundred euro's totally probably), please let me know. I'll probably give the headquarters about a month to react, before adding the results to my complaint to the Directorate-General. And remember, no reaction from the OEM's is also a reaction, since it tells quite a lot.

Conclusion

Hang on, wait till I finally have some time, courage and energy to start this new action somewhere in the next month, and put up with the long time the OEM's will need to react, or not react at all, as most of them did last time. I plan to post the answers at LXer. In the mean time, please register at Dell IdeaStorm, and add your vote to the (at this time) 91.000 people asking for Dell lap/desktops with pre-installed Linux. Not that you were going to buy a Dell of course (I hope), but we could make sure Dell understands how big the demand is, and change the impuls of the 'elephant traveling almost by lightspeed' by promoting that idea.



[1]
  • 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."
Windows® and Microsoft® are registered trademarks of Microsoft Corp. Linux® is a registered trademark of Linus Thorvalds. However, things might change as Linus Thorvalds is trying to acquire Microsoft Corp. The usual IANAL / TINLA disclaimers apply.

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