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. Their (in places absurd) 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, and  therefore 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 most consumers 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 stop this 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