Stakes rise in battle with Microsoft

Financial Times
14-Jan-2008
By Richard Waters in San Francisco

After nearly a decade of anti-trust battles between the European Commission and Microsoft, it is finally time for the real war to begin.

That was the message from Brussels on Monday as Neelie Kroes, the EU competiton commissioner, launched the first new investigation of the software giant since the late-1990s, in the process taking aim at some of the key weapons in its technology armoury.

The first phase in this saga was about establishing legal principles: should Microsoft be able to enter new software markets by "tying" new products to its Windows operating system, and should it be forced to disclose technical specifications that would let software made by other companies work seamlessly with its own?

On both counts, the Commission ruled against Microsoft early in 2004. An appeals court upheld the decision last September.

Significant as this legal precedent was, though, the case itself did not deal with any significant parts of the company's business. Microsoft had already vanquished rivals such as RealNetworks in the market for media player software, for instance.

And the specific market dealt with in the interoperability complaint - to do with "workgroup" servers that deal with mundane office tasks like managing printers - was largely a side-issue.

This time around, the stakes are much higher. Each of the issues now under Europe's Microscope is far more central to the company's business. With the Office suite of desktop applications, for instance, Brussels is investigating whether Microsoft unfairly keeps its file formats and other technologies secret so that documents and spreadsheets can't easily be exchanged with rival pieces of software, such as Open Office. Force it to open up, argue rivals, and business customers would feel freer to switch.

While the Office complaint deals with an entrenched part of Microsoft's business, a second complaint under investigation touches on a much newer one that rivals claim will become just as important in future. According to this, Microsoft is using its ".Net" technology - under development since the start of this decade - to create tight linkages in the software used to write applications that run over the internet.

"Microsoft is very good at seeing a threat and nipping it in the bud," says Thomas Vinje, head of ECIS, the trade group of Microsoft's rivals that brought the complaint.

The third element of the ECIS case concerns the close connections between Microsoft's widely used Outlook email software, which runs on PCs and other "clients", and the Exchange program on servers.

Opening up the links between these programs will make it possible for others to write software that works smoothly with Exchange, rivals claim.

The final element of the Commission investigation was prompted by a complaint late last year from Norwegian browser company, Opera. Using the precedent from the Media Player case, Opera claimed that Microsoft was unfairly tying its own browser to Windows at the expense of potential competitors.

Companies: European Commission ;Opera Software ASA ;European Union ;Microsoft Corp ;

Ticker Symbols: us:MSFT; no:OPERA;

Industries: Regulation Licensing & Inspection of Miscellaneous Commercial Sectors; Software Publishers; Admin of Economic Programs; Information; Publishing Industries;

Subjects: Government News; European Union Government; Monopolies & Antitrust; Company News; New Products & Services; Regulation of Business; Marketing;

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