News

EU Turns Up the Heat on Microsoft

• By Scott Bekker
• August 06, 2003

A negative final ruling against Microsoft could result in fines of up to 10 percent of its global annual revenue.

"This Statement of Objections, which includes the identification of appropriate remedies, gives Microsoft a last opportunity to comment before the Commission concludes the case. We are determined to ensure that the final outcome of this case is to the benefit of innovation and consumers alike," said Mario Monti, Competition Commissioner for the European Commission, the EU's executive arm.

According to the EU, Microsoft does not disclose interface information that Windows PCs and Windows servers use to communicate, creating an artificial barrier for other vendors of low-end servers that provide core services to PCs in corporate networks. The EU also alleges that the automatic presence of Windows Media Player on Windows PCs unfairly skews competition against rival multi-media software, namely offerings from RealNetworks and Apple Computer (QuickTime).

The new evidence cited by the European regulators consists of a number of surveys conducted by the European Commission. The Commission contacted European-based small, medium and large enterprises about the server-client issue and European- and U.S.-based content owners, content providers and software developers about the multi-media issue.

"An overwhelming majority of customers responding to this market enquiry highlighted that Microsoft's non-disclosure of interface information -- necessary for competing servers to properly 'talk' with Windows PCs and servers -- did indeed artificially alter their choice in favour of Microsoft's server products," an EU statement on the decision stated. "This behaviour is detrimental to competition on the merits."

As for tying, the industry respondents reportedly, "highlighted that the ubiquity of Windows Media Player on PCs artificially skews their development incentives in favour of Microsoft." The Commission's statement said the finding confirms its preliminary conclusion that tying Windows Media Player to Windows "weakens competition on the merits, stifles product innovation, and ultimately reduces consumer choice."

The European Commission proposes three remedies. For the server-client issue, the regulators want Microsoft to "reveal the necessary interface information so that rival vendors of low-end servers are able to compete on a level playing-field with Microsoft." As for Windows Media Player, the regulators offer two alternative proposals -- one being a stripped-down version of Windows without a Windows Media Player, and the other being a requirement that Microsoft include competitive media players with Windows.

The Wall Street Journal reported that Microsoft spokeswoman Tiffany Steckler in Paris called the EU's action "unfortunate" and refused to comment on whether the company would agree to new concessions.

Microsoft can be expected to argue that it has already taken steps necessary to address the complaints. Service Pack 1 for Windows XP and Service Pack 3 for Windows 2000 added software that allowed users to hide Windows Media Player, along with Internet Explorer, Outlook Explorer and the Java Virtual Machine, from view -- a step that critics argued was too little and too late to restore competition. The company also licensed protocols and interfaces as part of the antitrust settlement with the U.S. Department of Justice. The protocol licensing terms were updated this month in response to industry and government complaints.