1. 마스터 제목 스타일 편집 마스터 텍스트 스타일을 편집합니다 둘째 수준 셋째 수준 넷째 수준 다섯째 수준 2006. 1. 12 In Ok Son Korea Fair Trade Commission Abuse of dominance in hi-tech markets and network industries An Introduction based on the Microsoft case Prepared for the Training Workshop at Quang Binh, Vietnam

2. 마스터 제목 스타일 편집 마스터 텍스트 스타일을 편집합니다 둘째 수준 셋째 수준 넷째 수준 다섯째 수준 1. Nature of the abuse of dominance analysis in hi-tech industries 2. Microsoft case in U.S. 3. Microsoft case in EU 4. Microsoft case in Korea ① Overview ② Time-line & procedures ③ Facts & Assessments ④ Streaming Digital Media System ⑤ Instant Messenger ⑥ Remedies ⑦ Conclusion Outline of the presentation

3. 마스터 제목 스타일 편집 마스터 텍스트 스타일을 편집합니다 둘째 수준 셋째 수준 넷째 수준 다섯째 수준 1. Nature of the abuse in hi-tech industries

4. Nature of the abuse in hi-tech industriesIn U.S. in EU in Korea 4 Tipping occurs when network effects become so large that consumers are left with no other choice Network effects occur where a product ’ s value grows as more people use it. The more people use the product, the more valuable it becomes for each individual user. Direct vs. indirect : Telephone vs. WMV format contents Applications barrier to entry Nature of the abuse in hi-tech industries Network effects & increasing returns

5. Nature of the abuse in hi-tech industriesIn U.S. in EU in Korea 5 Nature of the abuse in hi-tech industries Positive feedback effects Importance of standard setting Winner takes all Dynamic competition – fast moving players

6. 마스터 제목 스타일 편집 마스터 텍스트 스타일을 편집합니다 둘째 수준 셋째 수준 넷째 수준 다섯째 수준 2. Microsoft case in U.S.

7. Nature of the abuse in hi-tech industriesIn U.S. in EU in Korea 7 Judge Jackson ruled against MS(2000) Illegal tying(Per Se) Structural(including corporate split) remedies conduct remedies (including code removal) Illegal tying(Per Se) Structural(including corporate split) remedies conduct remedies (including code removal) SPAD & etc. Required further trial re. Efficiency balancing(Rul e of Reason) Circuit court remanded tying case(2001) Settlement (2002) in U.S. Tying (1/4 issues) : Windows PC OS w/ IE

8. 마스터 제목 스타일 편집 마스터 텍스트 스타일을 편집합니다 둘째 수준 셋째 수준 넷째 수준 다섯째 수준 3. Microsoft case in EU

9. Nature of the abuse in hi-tech industriesIn U.S. in EU in Korea 9 in EU Legal assessment under Article 82 Dominance in the PC OS market Dominance in the PC OS market Harm to competition Two separate products No choice for customers No choice for customers Issue: Windows PC OS w/ WMP (+ Refusal to offer interoperability information)

10. Nature of the abuse in hi-tech industriesIn U.S. in EU in Korea 10 in EU Possibility that the market will “ tip ” ( à la Netscape) Windows Media Player does not have a discernible quality advantage Yet, from 1999 until now,  Microsoft has gone from having a relatively limited presence in the market to being the clear leader in terms of media player and media format usage  RealNetworks has experienced an equivalent decline, and other players (e.g. Apple ’ s Quicktime) have not experienced growth Impacts of MS ’ tying Implications for neighboring markets (e.g. digital media contents)

11. Nature of the abuse in hi-tech industriesIn U.S. in EU in Korea 11 Remedies Real Player WMP Quicktime Player WMP PC (Windows) WMP PC (Windows) Fines of 497M Euro in EU

12. 마스터 제목 스타일 편집 마스터 텍스트 스타일을 편집합니다 둘째 수준 셋째 수준 넷째 수준 다섯째 수준 4. Microsoft case in Korea

13. Nature of the abuse in hi-tech industriesIn U.S. in EU in Korea 13 in Korea It is illegal to condition the sale of a “ tying ” product upon the purchase of a “ tied ” product. Relevant law re. tying Relevant law re. tying 1. Dominance in tying product market 2. Tying vs. tied products : distinct 3. Coercion : purchase against will 4. Restraints of competition (Balance of anti-competitive effects & efficiency) 1. Dominance in tying product market 2. Tying vs. tied products : distinct 3. Coercion : purchase against will 4. Restraints of competition (Balance of anti-competitive effects & efficiency) Requirements

14. Nature of the abuse in hi-tech industriesIn U.S. in EU in Korea 14 in Korea 3 tying cases Server OS w/ WMS PC OS w/ WMP PC OS w/ IM Server OS w/ WMS PC OS w/ WMP PC OS w/ IM Networks effects & increasing returns, Tipping, Positive feedback effects, Importance of standard setting, Winner takes all Share many aspects of hi-tech networks industries But stable monopoly in OS? Winner by superior products? Overview

15. Nature of the abuse in hi-tech industriesIn U.S. in EU in Korea 15 in Korea 2001.9.5. Complaint for IM tying by DAUM(Korean IM business) 2004.4. WMS & WMP tying issues by KFTC initiative 2004.10.28. Complaint for WMS & WMP tying by RealNetworks 2005.3.31. Transfer of Examination Report by examiners to full Commission 2005.7.13~10.26 7-time Oral Hearings 2005.10.13 Settlements & Withdrawal by RealNetworks 2005.11.11 Settlements & Withdrawal by DAUM 2005.12.7 Conclusion announcement by KFTC 2006.1. Release of decision(expected) 2001.9.5. Complaint for IM tying by DAUM(Korean IM business) 2004.4. WMS & WMP tying issues by KFTC initiative 2004.10.28. Complaint for WMS & WMP tying by RealNetworks 2005.3.31. Transfer of Examination Report by examiners to full Commission 2005.7.13~10.26 7-time Oral Hearings 2005.10.13 Settlements & Withdrawal by RealNetworks 2005.11.11 Settlements & Withdrawal by DAUM 2005.12.7 Conclusion announcement by KFTC 2006.1. Release of decision(expected) Time-line

16. Nature of the abuse in hi-tech industriesIn U.S. in EU in Korea 16 in Korea 7 time oral hearings 6 time discussions by full Commission Exceptionally many experts by both sides 50 month review (longest in Korean competition case history) Procedures

17. Nature of the abuse in hi-tech industriesIn U.S. in EU in Korea 17 in Korea Core products in SW industry: Server OS & PC OS Core products in SW industry: Server OS & PC OS Tying Product Tying Product WMS, WMP, IM Increasing importance in New Economy WMS, WMP, IM Increasing importance in New Economy Tied Product Tied Product Facts & Assessments

18. Nature of the abuse in hi-tech industriesIn U.S. in EU in Korea 18 WMP PC (Windows) in Korea Real Player GOM Player Quicktime Player Microsoft ’ s tying Facts & Assessments

19. Nature of the abuse in hi-tech industriesIn U.S. in EU in Korea 19 in Korea Market dominance in OS market Late entry into tied product market Drastic M/S increase by leveraging 78% in PC server OS market 99% in PC OS market 78% in PC server OS market 99% in PC OS market Facts & Assessments

20. Nature of the abuse in hi-tech industriesIn U.S. in EU in Korea 20 What is it? in Korea Streaming Digital Media System

21. Nature of the abuse in hi-tech industriesIn U.S. in EU in Korea 21 What happened? in Korea Streaming Digital Media System

22. Nature of the abuse in hi-tech industriesIn U.S. in EU in Korea 22 in Korea Streaming Digital Media System Increasing dominance in digital contents market & digital communication market Foreclosure of tied product markets From middlewares Fortifying market dominance Removing potential threats to tying product markets Two-side effects Tipping to Windows system(worse than in EU)

23. Nature of the abuse in hi-tech industriesIn U.S. in EU in Korea 23 in Korea Instant Messenger

24. Nature of the abuse in hi-tech industriesIn U.S. in EU in Korea 24 MS messenger M/S trend in Korea Instant Messenger

25. Nature of the abuse in hi-tech industriesIn U.S. in EU in Korea 25 in Korea Remedies Pure Unbundling (Windows server OS w/o WMS) WMS 2 versions PC OS : Unbundling + Must carry Another Windows PC OS w/o WMP & IM Current OS added w/ competing MP & IM download icon Monitoring body Surcharges of 31M$ WMP & IM

26. Nature of the abuse in hi-tech industriesIn U.S. in EU in Korea 26 in Korea Remedies Real Player WMP Quicktime Player WMP PC (Windows) WMP PC (Windows) RealPlayer Quicktime GOM Player

27. Nature of the abuse in hi-tech industriesIn U.S. in EU in Korea 27 in Korea Conclusion Big case problem Overwhelming impacts Careful review & procedure required Continuing necessity for healthy competition under sound competition principles