EU expands probe of Microsoft
By Paul Geitner
Associated Press
BRUSSELS, Belgium — Even as it fights on in U.S. courts, Microsoft ran into new antitrust troubles yesterday when European regulators said they were adding to their probe of allegedly anti-competitive practices by the software giant.
The European Union fired off warnings on two fronts: that Microsoft may be violating antitrust laws by bundling its Media Player into its Windows operating system and that it may have used "illegal practices" to extend dominance in personal computers into server markets.
Microsoft, which denied wrongdoing, said it was committed to working with the EU's head office, the European Commission, to "resolve the issues" expeditiously.
"We believe our business practices are fair and legal," said John Frank, Microsoft's head of legal and corporate affairs in Europe. He also welcomed the EU's decision not to try to block the launch of Microsoft's newest operating system, Windows XP, set to hit stores in October.
The European Commission's objections stem from an investigation into Microsoft's Windows 2000 operating system launched last February. The Commission said it was merging that probe with another case, initiated in 1998 following a complaint from Microsoft rival Sun Microsystems regarding network servers.
The Commission sent its objections to Microsoft regarding the Sun case last year and is currently examining the company's reply. But the latest objections add "a new dimension to the Commission's concerns that Microsoft's actions may harm innovation and restrict choice for consumers," the Commission said.
Microsoft has two months to respond in writing. Frank said the company also would avail itself of its right to an oral hearing.
European Union competition law is in some respects more restrictive than U.S. antitrust law — and If Microsoft is found to violate it by bundling Windows Media Player, it could be required to exclude the application from future European versions of Windows, said Dana Hayter, a lawyer and antitrust expert with Fenwick & West in San Francisco.
Unlike U.S. authorities, the EU has no power to break up a company. If it concludes there is antitrust abuse, it can fine companies up to 10 percent of their annual global sales. In practice, though, fines have never exceeded 1 percent.
Iowa attorney general Tom Miller, who represents one of the 18 states suing Microsoft in the U.S. for antitrust violations, said the EU's action "gives us reassurance that we've been on the right track all along."
"It sort of verifies and reinforces what we've been doing in the United States," Miller said in an interview. "The other major antitrust player in the world is saying Microsoft is doing in other markets very similar illegal kinds of activities as we found in the browser market."
Commission spokeswoman Amelia Torres noted that the EU probe is "factually and legally separate" from Microsoft's problems in the United States. But she said the U.S. Justice Department was informed beforehand about the EU's move.
The U.S. antitrust case against the software company is focused on determining what penalty Microsoft should face for illegally trying to squelch competitors with business tactics that included bundling its Internet Explorer browser with Windows.
U.S. District Judge Colleen Kollar-Kotelly in Washington, D.C., has set a Sept. 21 hearing to decide how to proceed. Kollar-Kotelly was named to replace a judge who had ordered Microsoft split into two separate companies but was later removed from the case. An appeals court upheld his finding of antitrust violations but overturned his breakup order.
Microsoft's Media Player allows consumers to play audio and video files. The program's current version enables users to burn music CDs and the version shipping with Windows XP adds video editing capabilities.
By illegally tying the product into its dominant Windows lineup, Microsoft may be depriving computer makers and consumers of "free choice" over which brand of player they want to use "as there are no ready technical means to remove or uninstall" it, the Commission alleged.
On the other issue, the EU body said Microsoft may have used "illegal practices" to extend its dominant position in the market for personal computer operating systems into the market for low-end server operating systems. Such cheaper servers are usually used by companies to network personal computers and coordinate such tasks as printing.
Specifically, Microsoft may have withheld from outside software vendors key information needed to enable their products to work well with computers running on Microsoft operating systems, the Commission alleged.
Microsoft may also be using an "abusive licensing policy" for Windows 2000 to help extend its dominance from personal computers to servers, it said.
"Under the Microsoft scheme, if customers choose not to use an all-inclusive Microsoft scenario for PCs and servers, but decide to use competing server products, they are forced to bear a double cost," the commission said, adding that the practice may "artificially drive customers towards Microsoft server products, reducing choice to the detriment of the final customer."
In a statement, Competition Commissioner Mario Monti said: "Server networks lie at the heart of the future of the Web and every effort must be made to prevent their monopolization through illegal practices."
A trade group representing Sun and other high-tech giants, including AT&T, America Online and Oracle, welcomed the EU's action but warned delays would allow Microsoft to keep grabbing market share.
"Unfortunately, while this case has been pending, the competitiveness of the server market has seriously deteriorated," the Washington-based Computer and Communications Industry Association said in a statement.
