EC expands Microsoft probe

Microsoft faced new pressures on Thursday to overhaul its business practices after the European Commission launched a scathing attack on the software giant, calling its licensing schemes "abusive" and confirming that it is to widen its antitrust proceedings against the company.

In fresh accusations against Microsoft, the Commission said that practices used by the company to extend its domination of the PC market into the low-end server market are illegal, as is the tying of Media Player to the Windows operating system. The Commission said that both charges would be added to the existing antitrust investigation into Microsoft's business practices, which was started in February 2000.

A Commission spokesperson said Windows XP is not part of the European investigation, and that the Commission was not considering imposing restrictions on Microsoft while the investigation is under way. A Microsoft spokesperson said that the launch of Windows XP would not be affected.

In the US, Microsoft has fought a hard PR battle to assuage fears that the antitrust action it faces there would force a delay in the shipment of Windows XP. Microsoft executives there have remained adamant that Windows XP would be generally available in stores for its target date of 25 October, and in an unusual move made a big event of the shipment of Windows XP to its OEMs.

The EC's latest allegations against Microsoft focus largely on Windows 2000. In particular, the EC accuses Microsoft of withholding key information from competing server software vendors that would enable them to make their products interoperate with Windows - both the desktop and server versions.

Without this essential information, says the EC, alternative server software is being denied a level playing field, as it will be artificially deprived of the opportunity to compete with Microsoft's products alone. Microsoft tactics include, says the Commission, everything from straightforward refusal to reveal the relevant technical information, to policies of discriminatory and selective disclosure on the basis of a "friend-enemy" scheme.

Such strategies were reinforced by an abusive licensing scheme for Windows 2000, says the Commission. Under this scheme, customers who run non-Microsoft operating systems on their servers can be forced to pay twice for client licences.

The Commission said it also believes that by tying Media Player to Windows, Microsoft has acted illegally and be depriving PC manufacturers and buyers of free choice over which products they have on their PCs. The problem is compounded, says the Commission, by the fact that there is no ready technical means to remove Media Player from Windows. "The result is a weakening of effective competition in the market, a reduction of consumer choice, and less innovation," said the Commission.

The competition commissioner, Mario Monti, said every effort must be made to prevent the monopolisation of server networks through illegal practices. "The Commission also wants to see undistorted competition in the market for mediaplayers," he added. "The Commission is determined to ensure that the Internet remains a competitive marketplace to the benefit of innovation and consumers alike."

Microsoft issued a brief statement on the action, but declined to comment further. "We are confident that once it has completed its investigation, the European Commission will be assured that we run our business in full compliance with EU law," said the statement.

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