Tied selling of Windows O/S with computer hardware in Canada: a complaint to the Competition Bureau

To follow up on my recent victimization by the “Microsoft Tax”, I filed a complaint with the Canadian Competition Bureau, the federal agency charged with investigating anti-competitive behaviour. I think I understand their response, which I’m including below, but there may be other routes within the Competition Act on which to base a complaint.

And of course, my posting the letter from the competition bureau here does not mean that you should not write your own to them! Bureaucracies change, and voices may even add up. There response reflects only one legal and economic interpretation.

Dear Mr. Barrington-Leigh:

In your complaint to the Competition Bureau you indicated that on some unspecified date you purchased a Lenovo ThinkPad notebook computer with Microsoft Windows operating system (“Windows O/S”)pre-installed.  Before you purchased the computer, the retailer informed you that the computer would not be sold without Windows O/S in it.  After you purchased the computer you removed Windows O/S andreplaced it with a different, compatible O/S, namely Linux Ubuntu.  You were then able to use your computer for its intended purpose without any problems.  Subsequently you contacted the retailer,requesting a partial refund on the purchase price of the computer in compensation for not using the Windows O/S on your computer.  They refused.

As discussed with you by telephone on November 3, 2010, your complaint concerns the fact that you were required to buy a ThinkPad notebook computer (hardware product) with Windows O/S (software product)pre-installed, although you did not want that particular software product and said so to the retailer.  These circumstances relate to the tied selling provision found in section 77 of the Competition Act(the “Act”).

In order for this described practice to constitute a violation of the tied selling prohibition in the Act, entry or expansion of a competitor to Microsoft in the notebook computer O/S product market mustbe impeded, or this practice must have some other exclusionary effect in the marketplace.  Additionally, this practice must also result in or be likely to result in a substantial lessening of competitionin the O/S product market.  To this end, you not have provided, nor does there appear to be, any evidence that the entry or expansion of either existing or potential competitors has been impeded,especially considering that Linux is an open-source, freely distributed O/S product.

Consequently, nothing you provided indicated that competition had been or is likely to be lessened substantially in the personal computer O/S product market. Although the purchase of Windows O/S appearsto be tied to the simultaneous purchase of a Lenovo ThinkPad notebook computer, this arrangement does not constitute anti-competitive conduct within the meaning of tied selling contained in s.77, andtherefore does not violate the Act.

It was also mentioned to you that this particular tied selling arrangement could be considered reasonable by the Competition Tribunal pursuant to s. 77(4)(b) of the Act, as it is likely that the mostconsumers prefer that their personal computer come with a pre-installed O/S. In such a situation the Tribunal would be prohibited from ordering the remedy provided by the Act, namely that Lenovo stopthis tied selling practice so that it must sell its ThinkPad notebook computers without any O/S pre-installed.

Yours truly,

Agent du droit de la concurrence / Competition Law Officer Direction générale des affaires civiles/Civil Matters BranchBureau de la concurrence/Competition Bureau50 rue Victoria / 50 Victoria Street Gatineau, Quebec K1A 0C9 Gouvernment du Canada / Government of Canada / site web / website: http://www.cb-bc.gc.ca

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4 Responses to Tied selling of Windows O/S with computer hardware in Canada: a complaint to the Competition Bureau

  1. Lxerguest says:

    The first argument from the competition bureau is circular logic:there are no competing OS companies affected by this (tying) so there are none that are adversely affected. Well,duh! We have a near total monopoly where MS has wiped out the competing BEOSes or Linspires. (Note that just because Linux is a free operating system does not mean a company cannot charge for a version with convenience features added on, though the presence of Canonical/Ubuntu dumping,or spending below revenue levels for an indefinite period) has tended to dry up revenue stream for such potential competitors.

    Secondly, the assumption that “most” consumers would prefer a computer with an OS has no bearing on whether a customer would prefer not having to pay more for their PC to get that OS, if they would choose to spend that money on an alternate OS IF THEY HAD BEEN OFFERED SUCH A CHOICE IN THE FIRST PLACE.

    Congratulations to the author for showing a backbone in this age of passive compliance.

  2. Lxerguest says:

    Correction:… Canonical /Ubuntu spending ABOVE what they charge in order to gain market share,for an indefinite period with no end in sight, negatively affects cash streams of existing,former, and prospective future Linux desktop OS commercial ventures which are thus limited in what they may charge and hence their ability or interest to compete.Otherwise without the Canonical dumping, there would be more of a lucrative opportunity to compete with Microsoft high arbitrary monopoly pricing of their OS (though faced with temporary competition in the netbook market,they too resorted to dumping-level prices of their XP OS for to keep marketshare against Linux).And now Microsoft’s pricing schemes likely include a bargain basement “starter” version of their OS that can be upgraded to “premium” for a fee, thus pre-empting such windows of opportunity for low-priced competing OSes in the future.

    Of course, no thanks to the competition bureau while Microsoft had years of building their multibillion dollar stranglehold on the industry (and even extending to other industries,standards bodies, and political influence) subsidized by their unfettered right to collect PC tax, another window of opportunity may arise from the emergence of powerful ARM processor-based systems, for which the inertia of 3d-party software support for the incumbent monopoly has not yet been built up. Alas, the cynical monopoly will lock down ARM-based computers so that the pre-installed Windows may not even be replaced by the user, and once again the mealy-mouthed apologists from the competition bureau will find an excuse for the monopolist so they don’t have to rock the boat and upset their bureaucratic day.

  3. Steve says:

    I know this is a very late comment to an old post, but nothing much has changed and it’s still disgusting that such criminal behaviour is allowed by any corporation. Our only hope is for people to wake up and stop buying anything from Microsoft.

  4. cpbl says:

    I just noticed this article, http://www.zdnet.com/article/the-windows-tax-fight-is-finally-over-buyers-can-get-a-refund-on-their-microsoft-os-in-italy/ on a case in Italy, settled in 2014 after years in court, which ruled against the Microsoft tax. So in Italy now you can in principle get a refund for such uncompetitively bundled software.

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