The Wall Street Journal-20080115-EU Regulators Begin New Microsoft Probes
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EU Regulators Begin New Microsoft Probes
BRUSSELS -- The European Union, fresh from its recent victory in a landmark antitrust case against Microsoft Corp., has begun two new investigations into the software company.
European Commission regulators yesterday said they have begun to investigate potentially abusive competition practices, setting the stage for a renewed clash between the technology mainstay and the EU's increasingly powerful antitrust authorities.
The new probes focus on two important areas for Microsoft: its Web browser, Internet Explorer; and its software suite, Office. The EU is examining whether Microsoft harms alternative browser vendors by packaging Internet Explorer with its ubiquitous Windows operating system and whether it harms other office-suite vendors by controlling the file format used to store office documents.
The EU's previous effort was a nine-year struggle that frayed relations between European and U.S. regulators. It ended last year with a court win for the EU competition watchdog. Although the case dealt with relatively minor corners of Microsoft's empire, the company faces fines that could total more than 1 billion euros ($1.49 billion).
The cases stem from a complaint filed last month by Norwegian browser-vendor Opera Software ASA and a 2006 complaint from the European Committee for Interoperable Systems, or ECIS, a group led by International Business Machines Corp. and other Microsoft rivals. That group has been a driving force behind Europe's antitrust pursuit of the company.
In addition to touching on Office, the ECIS complaint broadly faults Microsoft for withholding information in several domains, the EU said. The investigation will "focus on all these areas," the EU said. Those could include Microsoft's email servers and its system for running Web-based applications.
"The commission seems to have got its teeth into a range of issues," said John Pheasant, an antitrust lawyer at Hogan & Hartson in London. "All pretty important stuff."
Microsoft said it will cooperate with the probes and is "committed to ensuring" that it is "in full compliance with European law."
Opening the investigation doesn't necessarily mean the EU will bring a case, although the regulator said Microsoft will be examined "as a matter of priority." If a case is pursued, next would come a confidential "statement of objections" laying out the allegations. Microsoft could then respond. A formal set of charges, called a decision, may then be issued. That process could take months or years.
The EU's first case against Microsoft began with a 1998 complaint by rival Sun Microsystems Inc. The first statement of objections arrived in 2000 and a decision in 2004. The EU said Microsoft illegally shut Sun out of the market by withholding computer code needed to make Sun's computers work with Microsoft's. It also said the company abused its Windows monopoly by bundling media-player software with the operating system. The commission assessed a record fine of 497 million euros ($739.1 million), which was upheld in September.
That case ended when a court vindicated the EU's position. A month later, Microsoft said it wouldn't pursue further appeals.
Besides the fine, the practical effect was fairly small. By the time the case ended, standalone media players had declined in importance as Web-based video ascended. Furthermore, the types of machines Sun wanted access to represented only a small part of the market.
But EU regulators won a critical precedent: The judges on the Luxembourg-based Court of First Instance confirmed the illegality of a monopolist's bundling products, and upheld the EU's power to compel a dominant company to share so-called interoperability information.
That precedent, say lawyers opposing Microsoft, makes cases against the Web browser and Office far more compelling. "Each of the ECIS complaint and the Opera complaint fits in those parameters," said Maurits Dolmans, a lawyer at Cleary Gottlieb Steen & Hamilton in Brussels who represents ECIS members.
Opera alleges that Microsoft modifies the standard Web language -- the code that tells a browser how to display pages fetched from a Web site -- to the detriment of small makers of browsers. The modifications mean there is a "separate Web," said Jon von Tetzchner, Opera's chief executive. Because of Microsoft's dominance, Web designers have to make sure first that their pages work with Internet Explorer, he said.
"Browsers of lesser market share -- basically everyone else -- have to spend a lot of time making sure" they are compatible with Internet Explorer, Mr. von Tetzchner said.
Thomas Vinje, a lawyer at Clifford Chance in Brussels who represents ECIS, said the new investigations have the potential to be "transformative of the software landscape" because they go to the heart of Microsoft's control of desktop computing.
"Antitrust authorities around the world have been chasing the dragon's tail for years now," Mr. Vinje said. "It's about time to do something to open up the core monopolies to true competition on the merits."
