The Elusive Antitrust Standard on Bundling in Europe and in the United States at the Aftermath of the Microsoft Cases

We analyze and contrast the US and EU antitrust standards on mixed bundling and tying. We apply our analysis to the US and EU cases against Microsoft on the issue of tying new products (Internet Explorer in the US, and Windows Media Player in the EU) with Windows as well as to cases brought in Europe and in the United States on bundling discounts. We conclude that there are differences between the EC and US antitrust law on the choice of the relevant analogy for bundled rebates (predatory price standard or foreclosure standard) and the implementation of the distinct product and coercion test for tying practices. The second important difference between the two jurisdictions concerns the interpretation of the requirement of anticompetitive foreclosure. It seems to us that in Europe, consumer detriment is found easily and it is not always a requirement for the application of Article 82, or at least that the standard of proof of a consumer detriment for tying cases is lower than in the US.tying, bundling, foreclosure, requirement contracts, monopolization, Microsoft, predatory pricing

Significant Market Power in Telecommunications: Theoretical and Practical Aspects

From an economic perspective efficiency and innovation are crucial aspects of functional competition in telecommunications where one has to take into account sector specific problems. Besides those specific aspects we consider the topic of significant market power and its evolution. As a special problem we focus on product bundling issues and aspects of network dynamics. As regards policy conclusions there is need for differentiated approaches. We emphasize the need for a dynamic perspective of competition in telecommunications markets. With respect to oligopolistic markets we present as a theoretically new approach an application of the Hitch-Sweezy model of competition - the implication is that (price)regulation should be restricted to a very small field.Telecommunications, market power, network economies

Integration of On-Premises and Cloud-Based Software: The Product Bundling Perspective

Firms in the cloud-computing era are facing the critical issue of integrating on-premises software and cloud-based software services. To date, the software industry has designed two different types of integration methods—an enterprise service bus (ESB) and an integration platform as a service (iPaaS). However, there are conflicting views on when and how to use these different integration methods to fulfill integration needs. This study aims to resolve this confusion through economic modeling. By focusing on the indirect network effect and following a two-product bundling framework, we establish a stylized model to investigate optimal pricing and bundling decisions and the best integration choice. Our findings contradict common perceptions that an iPaaS is the better choice for integration and show that firms can derive higher value by adopting ESB to integrate on-premises software and cloud-based software services. Conceptually, given that the overall network value received from a cloud-based software service is higher, the use of ESB can contribute toward significantly improving the total value of the two software applications. We also find that unbundling is the best marketing strategy for firms because software integration can improve the valuation of individual software. Our findings have important implications for software vendors. They suggest that vendors can leverage a higher network value from the software service by integrating it with on-premises software applications through ESB rather than iPaaS and eventually realize higher profits by extracting more value from consumers. Since integration increases the value of individual products, vendors should sell them separately instead of offering them as a bundle

The Elusive Antitrust Standard on Bundling in Europe and in the United States in the Aftermath of the Microsoft Cases

Allegations of anticompetitive tying and bundling were significant parts of the antitrust cases against Microsoft in the United States and the European Union. The facts are well known. Starting with the integration of MS-DOS to Windows and the introduction of Windows XP, Microsoft has progressively produced and added to the Windows operating system a number of applications, such as its Web browser, Internet Explorer (which was included in Windows 95 in 1995), and Windows Media Player (WMP), which was integrated to Windows ME in 2000. Microsoft's policy of integrating new functionalities to the Windows operating system has been challenged by both the U.S. and the European antitrust authorities

The Elusive Antitrust Standard on Bundling in Europe and in the United States at the Aftermath of the Microsoft Cases

We analyze and contrast the US and EU antitrust standards on mixed bundling and tying. We apply our analysis to the US and EU cases against Microsoft on the issue of tying new products (Internet Explorer in the US, and Windows Media Player in the EU) with Windows as well as to cases brought in Europe and in the United States on bundling discounts. We conclude that there are differences between the EC and US antitrust law on the choice of the relevant analogy for bundled rebates (predatory price standard or foreclosure standard) and the implementation of the distinct product and coercion test for tying practices. The second important difference between the two jurisdictions concerns the interpretation of the requirement of anticompetitive foreclosure. It seems to us that in Europe, consumer detriment is found easily and it is not always a requirement for the application of Article 82, or at least that the standard of proof of a consumer detriment for tying cases is lower than in the US

Innovation, Learning Organizations and Industrial Relations

Innovation may be seen as a process of knowledge creation and the speed and direction of knowledge creation reflects the organizational set-up of the firm as well as its investments in R&D and training. Establishing ‘a learning organization’ where horizontal interaction and communication inside and across the borders of the firm is a major factor promoting knowledge creation in the context of a learning economy. An important issue is to what extent direct and indirect participation of employees in shaping the new form of organization is critical for its realization. On the basis of a unique data set covering 2000 Danish private firms it is demonstrated that firms combining several of the organizational traits of the learning organization are much more prone to introduce new products than the others. It is also demonstrated that such firms have involved employees in different forms of direct and indirect participation much more frequently than the rest. As more sectors become exposed to the need to engage in incremental product and service innovation the economic potential of diffusing good practices in terms of organization and participation is growing and needs to be reflected in firm strategies and public policies aiming at promoting innovation and knowledge creation.Innovation, knowledge creation, learning economy

Rational Regulatory Policy for the Digital Economy: Theory and EU Policy Options

Telecommunications is a key element of the ICT sector which has been shaped by strong innovation dynamics since the 1990s. Market dynamics in selected OECD telecommunications markets are analyzed. We present new ideas about efficient regulation, emphasizing the need to adopt a broader international perspective. Analytical innovations also include the discussion of an adequately-modified Hitch-Sweezy oligopoly model. Moreover, we suggest differentiated two-part tariffs as an ideal welfare-maximizing approach in both wholesale and end-product markets. From a theoretical point-of-view, the need to avoid regulatory uncertainty is also emphasized. Theoretical progress is contrasted with regulations in the EU and the US. The EU offers a broad range of different regulatory approaches where the link between framework regulation and national regulation is rather complex. The internationalization of telecommunications requires a broader cooperation among regulators in the OECD.Digital Economy, Regulatory Policy, European Union

The Roles of Corporate IT Infastructure and their Impact on IS Effectiveness

In the strategic alignment model of Henderson and Venkatraman (1993) [1] IT infrastructure has an important but only implicitly defined role. According to evolving literature, IT infrastructure serves many different purposes in large companies. We outline the main missions (roles) of the corporate-wide IT infrastructure and its contribution to IS effectiveness and study the relationship of IT infrastructure with alignment processes and strategic integration. Our empirical tests with data from almost one hundred large companies resulted in three IT infrastructure roles, which reflect the IS communality, strategic, and flexibility dimensions of the corporate-wide IT infrastructure. The roles were not symmetrically related to the IS effectiveness and alignment perspectives. IT infrastructure roles had a significant interplay with strategic integration in improving IS effectiveness. However, the interplay of IT infrastructure roles with alignment perspectives had only marginal effects. Implications of the results for research and practice are discussed