Green light for Software Assurance

Microsoft says the rejection by the Commerce Commission of a complaint against it means it can get on with telling customers about its new Software Assurance licensing scheme.

Microsoft says the Commerce Commission's decision not to investigate a complaint of anti-competitiveness against it means it can get on with giving customers information and tools to review its Software Assurance licensing programme.

The commission rejected Auckland law firm Clendon Feeney’s complaint, saying Microsoft’s behaviour is not anti-competitive.

“In our view there’s nothing anti-competitive in what Microsoft is doing, therefore it’s not a breach of the Commerce Act," says the director of the commission's business competition branch, Geoff Thorn.

Microsoft New Zealand managing director Ross Peat says the company understands that Software Assurance is a significant change in the way the company sells products to its business customers.

"We are working hard to ensure that our customers understand the benefit of the changes and the range of choices that they have with their software licensing. It is important that our customers are in a position to make the best informed decision for their business."

Clendon Feeney partner Craig Horrocks, who laid the complaint, says he isn't surprised the commission has decided not to take the matter any further.

"I hope that my complaint at least raised awareness of the cost increases and some of the implications of the Microsoft decision to cancel upgrades."

Clendon Feeney’s operation arm, Infraserv, laid the complaint three months ago, accusing Microsoft's licensing changes of being in breach of the Commerce Act. Software Assurance requires customers to pay two years in advance for the right to any Microsoft software upgrades, regardless of whether or not the company releases any within those two years. In the past customers have bought upgrades as they required them.

The Commerce Commission's Thorn says although it could be argued that Microsoft has a substantial degree of market power in the operating system market, Software Assurance doesn’t prevent other people from operating in the market.

"The Commerce Act doesn’t dictate to businesses how they set prices, how they sell products or what sort of product mixes they use. It looks at companies that have a substantial degree of market power and that are using it to restrict the ability of other people to compete. If we assume Microsoft has a substantial degree of market power in the operating system market -- and we could probably say it has -- unless it’s preventing other people from operating in the market, it’s not breaching the act. It’s simply put products into the market and Software Assurance doesn’t stop other people from putting their products into the market.”

Horrocks says during the investigation the commission engaged extensively with Microsoft over the complaint but he received only one phone call.

“I had to explain basics relating to IT and licensing. On the other hand, a team came to Auckland to talk to Microsoft. The implication was clear -- they did not even need to talk to me in person.”

However, Thorn says a team didn’t go to Auckland to specifically speak to Microsoft. “We had people in Auckland doing other investigations and while they were there they took the opportunity to talk to Microsoft.”

The decision has led Horrocks to question the government’s commitment to the knowledge economy. “It appears that the bureaucrats are, instead of trying to understand the real import of this for our country and our so-called knowledge economy, trying to raise the number of seats under the government's contract with Microsoft to 80,000.”

Meanwhile, the Ministry of Commerce is looking at a separate complaint, filed by Clendon Feeney earlier this, alleging that Microsoft has transgressed the Fair Trading Act. That complaint relates to an electronic brochure issued by Microsoft to software dealers entitled "Licensing Programs Change After July 31: Understand Your Options".

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