Microsoft Reportedly in Talks With the EC

In an apparent move to end the thorniest of its legal hassles, Microsoft is reported to be in talks with the European Commission (EC) as it aims to settle charges over the software giant’s practice for more than a decade of bundling Internet Explorer with Windows.

According to a story Tuesday on, Microsoft (NASDAQ: MSFT) officials are trying to work out a settlement with the EC over two current probes, not just the one that’s received the most press.

That includes both the browser bundling charge, initially brought by Norwegian browser maker Opera, as well as a complaint that it has kept interoperability information about its products, particularly Microsoft’s Office suite, from competitors.

The second probe emanates from a charge made by the European Committee for Interoperable Systems (ECIS), an organization that includes many of Microsoft’s most vituperative competitors, such as Adobe Systems, Corel, IBM, Linspire, Nokia, Opera, Oracle, RealNetworks, Red Hat, and Sun Microsystems.

Microsoft has already come up short once for trying to stare down the EC’s competition directorate. The EC is the executive branch of the European Union (EU).

In October 2007, the company finally agreed to settle an earlier case regarding illegal bundling of Windows Media Player with Windows as well as withholding interoperability information for workgroup computing with rivals.

That case resulted from an EC ruling against Microsoft in 2004, which the company appealed but lost in September 2007, prompting Microsoft to settle.

Microsoft paid the EC roughly $613 million in fines in the original abuse of market dominance case. It later was fined an additional $357 million for dragging its feet up until June 2006 in regard to providing the required interoperability information. A third fine remains outstanding in the 2004 case, levied for dragging its feet between June 2006 until October 2007, when Microsoft finally agreed to settle.

Microsoft is currently appealing that third fine in the 2004 case, which adds another $1.35 billion in fines to Microsoft’s penalty totals.

While the earlier case has been costly, the current case has the potential to be the most expensive in both Microsoft and EC history, since the accusations go back to 1996.

Additionally, Microsoft alerted shareholders in its March 2009 10-Q filing that the EC has the authority to fine Microsoft a percentage of every dollar it made in operating system sales worldwide going back to the beginning of its bundling policy, a move which initially was meant to undercut its main browser rival at the time, Netscape Navigator.

Opera’s complaint is that the anticompetitive practice of bundling Internet Explorer (IE) with Windows — and requiring that PC makers ship IE with Windows — froze it and other browser makers out of the market.

The browser bundling case began in late 2007 with Opera’s complaint, followed by the EC’s “Statement of Objections” — similar to charges and proposed penalties — sent to Microsoft in January 2009. Microsoft sent its written legal response to the EC this spring, and requested a formal hearing.

The company’s lawyers ultimately ended up canceling the hearing because the majority of EC competition brass were not going to be in Brussels for Microsoft’s presentation and the EC refused to reschedule the hearing.

Observers expect either the EC’s ruling or a settlement could come at any time, although Bloomberg reported that Microsoft appears to be trying to get both the browser and the Office cases settled by the time that European Competition Commissioner Neelie Kroes’ term expires in November. She has been outspoken about her feelings regarding Microsoft and its market dominance.

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