News

Microsoft ruling draws fire from U.S. lawmakers

• By John K. Waters
• March 29, 2004

A group of U.S. lawmakers last week roundly criticized the European Commission's decision to fine Microsoft Corp. a record 497 million euros ($611 million) for anticompetitive practices. In an open letter sent to EU Competition Commissioner Mario Monti on the day the decision was announced, 10 members of the U.S. House International Relations Committee suggested that the fine was unnecessary because the Department of Justice (DOJ) had already ''addressed and resolved the same matters'' on which the Commission ruled.

The letter read, in part: ''The [U.S.] court's Final Judgment established a comprehensive regulatory scheme that not only resolved past conduct, but also created a detailed compliance structure to address future competitive concerns that might arise. Because this exact issue was raised and resolved during the U.S. settlement, it should not have been an area of concern for the EU.''

The lawmakers went on to point out that the U.S. and EU had signed an antitrust cooperation agreement in 1991, which was strengthened in 1998. With such an agreement in place, the EU's decision was ''difficult to understand,'' the letter read.

''We should also note that this case involves a U.S. company,'' the letter added, ''that the complaining parties in the EU were primarily U.S. companies and that all of the relevant design decisions occurred in the United States.''

In addition to the fine, the Commission ordered Microsoft to create what amounts to a European version of its Windows operating system stripped of the Windows Media Player currently bundled free with the OS. The Commission also wants the company to disclose ''complete and accurate'' information about server APIs and protocols, so that makers of competing media players (such as RealNetworks' RealOne/RealPlayer software and Apple Computer's QuickTime player) can write applications that 'play nicely' with key Windows client applications.

In a separate statement issued by his office, Representative Robert Wexler, D-Florida, charged that the Commission's decision could discourage U.S. companies from marketing their products in Europe. ''This effort by the commission to address issues that were previously settled in the U.S. courts will undermine the global competitiveness of many U.S. firms, impede American job growth, and impair innovation in many U.S. sectors,'' Wexler's statement read.

Neil Ward-Dutton, principal analyst with U.K.-based analyst firm Ovum, believes that the decision is unlikely to have a material effect on Microsoft's business, even if the Redmond, Wash.-based software giant ever gets around to complying with it. He expects Microsoft to appeal the decision immediately and drag the process out for years; beyond legal maneuvering, the Commission has simply targeted an area where Microsoft is already ahead of the game.

''From a Windows Media perspective, Microsoft is two steps ahead of this ruling,'' Ward-Dutton said. ''It has already made big strides in ensuring that the Windows Media format, and the associated server products and creation tools, are widely adopted by content and service providers.''

If the Commission had really wanted to deal with the Windows Media issue, Ward-Dutton added, it should have turned its attention to server APIs, codecs and protocols, instead of the desktop. ''By focusing its efforts on the desktop, the ruling has no effect on anything Microsoft might do on other types of client device,'' he said, such as set-top boxes, smartphones and PDAs.

The real issue, Ward-Dutton said, is not the dominance of the Windows operating system and Microsoft's ability to leverage that dominance into other market segments, which ''makes the playing field on which Microsoft innovates uneven.'' The real issue, which the Commission's ''ineffective'' ruling underscores, is the lack of a clear international policy for dealing with competitive issues in the industry.

Ward-Dutton calls for a more ''enlightened approach to protecting competition'' in the IT industry. ''Until there is a consistent, coherent, considered approach to how to deal with situations like [this ruling], competition agendas will continue to be set by opportunistic actions by industry competitors,'' he said.