EU Warns Microsoft on Antitrust Violations

For anyone thinking that Microsoft’s antitrust problems were over, the European Union proved otherwise, today. Antitrust regulators faulted the software giant’s technological and business practices, giving the company one last chance to respond before an investigation concludes.

The European Union’s Competition Commission took about four years to reach its conclusions.

The European case differs dramatically from the one Microsoft battled in the United States. The U.S. case largely focused on Microsoft’s integrating Internet Explorer into Windows 98 and the company’s technological and business practices during the so-called browser wars with Netscape. The EU has focused on Microsoft’s using its dominance in desktop operating systems to gain a foothold in the server market. About two years ago, the European Commission expanded the case to include Windows Media Player. With the release of Windows XP, Microsoft fully integrated the media player into the operating system. Microsoft also bundles Windows Media production and serving tools into Windows Server. There is no separate charge for these technologies, which are included in the cost of the OS, whether desktop or server.

The EU’s case has teeth, in some respect more than the U.S. lawsuit. The European Commission could fine Microsoft up to 10 percent of annual revenue, or about $3.2 billion based on fiscal 2003 results. European regulators also have the power to demand significant changes to Microsoft software, something that nine plaintiff unsuccessfully sought in the United States.

In a press release issued today, that you can find here, the EU sternly warned Microsoft that it has "one last opportunity to comment" before the antitrust probe formally concludes. Regulators said that they had uncovered tying and interoperability violations and that the "Commission's preliminary conclusion is that Microsoft's abuses are still ongoing."

The European Commission concluded that Microsoft’s has not fully disclosed interface protocols necessary for competing server products to easily work with Windows. This action "influenced" enterprises’ buying decisions in favor of Microsoft products, EU investigators concluded.

EU regulators concluded Windows Media Player tying skews "development incentives in favor of Microsoft" and "weakens competition on the merits, stifles product innovation, and ultimately reduces consumer choice."

The European Commission said that it had "preliminarily identified" the core information Microsoft would have to disclose to level the competition playing field for lower-end server competitors. As for the tying, Microsoft would have to unbundle Windows Media Player, such as selling a version of the OS without the technology. Another option: A must-carry provision for competing media players. A fine also is planned, but regulators did not indicate how much that would be.

While I am no lawyer, I do understand some of the nuances between European and U.S. antitrust law. In the United States, the laws largely seek to protect consumers from the effects of illegal competition. European regulators put more emphasis on the impact on competitors, which raises the bar for a company like Microsoft. Here, courts determined that Microsoft is a monopoly, which by itself is not an illegal act. Violations occur when a company abuses its monopoly power. But in Europe, the lines are drawn somewhat differently.

Posted by Joe Wilcox at August 06, 2003 08:16 AM