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EU Offers Microsoft Last Chance

The European Union Wednesday said it will give Microsoft one final opportunity to comment before it wraps up the antitrust probe it launched against the software titan nearly four years ago.

In a statement Wednesday, the EU's European Commission said: "The commission has gathered additional evidence from a wide variety of consumers, suppliers and competitors. This evidence confirms and in many respects bolsters the commission's earlier finding that Microsoft is leveraging its dominant position from the PC into low-end servers and that Microsoft's tying of Windows Media Player to the Windows PC operating system weakens competition on the merits, stifles product innovation, and ultimately reduces consumer choice."

The commission laid out its evidence in a 'Statement of Objections,' along with potential remedies, and invited Microsoft to comment before it finishes up the case.

"This Statement of Objections, which includes the identification of appropriate remedies, gives Microsoft a last opportunity to comment before the commission concludes the case," Mario Monti, competition commissioner, said in a statement Wednesday. "We are determined to ensure that the final outcome of this case is to the benefit of innovation and consumers alike."

"Microsoft has just received the commission's final Statement of Objections and we are now examining it to thorougly assess the concerns of the commission in detail," Microsoft spokesperson Stacy Drake told internetnews.com. "Microsoft takes this investigation very seriously and continues to work hard to maintain a dialogue that will allow positive resolution to the commission's concerns and this new Statement of Objections."

However, Microsoft was not ready to discuss the commission's suggested remedies. "We just can't speculate on the possible outcomes or the suggested remedies of the commission," Drake said.

Joe Wilcox, Microsoft analyst for Jupiter Research, noted, "For anyone thinking that Microsoft's antitrust problems were over, the European Union proved otherwise, today."

Pointing out that the EU's antitrust laws differ considerably from United States laws -- European regulators put more emphasis on protecting competitors whereas United States law seeks to protect consumers from the effects of illegal competition -- Wilcox said, "The EU's case has teeth, in some respect more than the U.S. lawsuit. The European Commission could fine Microsoft up to 10 percent of annual revenue, or about $3.2 billion based on fiscal 2003 results. European regulators also have the power to demand significant changes to Microsoft software, something that nine plaintiffs unsuccessfully sought in the United States."

In its statement, the commission said its preliminary conclusion is that "Microsoft's abuses are still ongoing."

The commission said its evidence -- from talking to small, medium and large enterprises from all industrial sectors and across the EU -- confirms that the company is leveraging its dominant position in the PC to corner the market on low-end servers.

"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 favor of Microsoft's server products," the commission said. "This behavior is detrimental to competition on the merits."

Its investigation also led it to conclude that the ubiquity of Windows Media Player on PCs artificially skews development incentives in favor of Microsoft. "This confirms the commission's preliminary conclusion that Microsoft's tying of Windows Media Player to the Windows operating system weakens competition on the merits, stifles product innovation, and ultimately reduces consumer choice."

To remedy the first complaint, the commission said it has provisionally identified the core disclosure obligations that would allow Microsoft's competitors to reach full interoperability with Windows PCs and servers, and said Microsoft would have to reveal the application programming interfaces (APIs) that would allow rival vendors to compete on a level playing-field.

As to the tying of Windows Media Player to the Windows operating system, the commission put forth two possible remedies. The first is that the software giant could sever Windows Media Player form the operating system, with Microsoft required to offer a version of Windows that doesn't include the media player. The EU said that is the normal remedy for a tying infringement. The alternative is a "must-carry" provision, which would require Microsoft to offer competing media players with Windows.

"Both solutions seek to ensure that consumers have a fair choice as regards media players," the commission said.

The Computing Technology Industry Association (CompTIA), which has long sided with Microsoft in its antitrust tribulations, said Wednesday that it is encouraged that the EU's probe seems to be drawing to an end, though it also noted that the EU should take the settlement reached between Microsoft and the United States Department of Justice as a roadmap for resolving the case.

"Since the birth of the PC, the information and communications technology industry has been able to provide unparalleled innovation and value to consumers without the need for government intervention," Lars Liebeler, antitrust counsel for CompTIA, said in a statement Wednesday. "Where such intervention has been warranted, narrowly tailored remedies are the best way to benefit consumers and the industry. The proposed regulations from the [European Commission] -- such as forcing Microsoft to open up its server software code to competitors, as well as restrictions on its media player -- must be viewed within this context.

"To this end, the settlement reached last year between the U.S. DOJ, settling states and Microsoft should provide a good roadmap for the [European Commission]. Not only does it bring with it a positive and proven track record, this expansive agreement was recently reaffirmed as working by the federal court overseeing the settlement, and has additionally been further modified to make it even more 'competitor-friendly.' Microsoft's compliance and its good faith efforts to adhere to this settlement are not in doubt."