Bill Gates has won in Washington, but can he beat Brussels?
With its antitrust case headed toward a settlement in the United States, Microsoft Corp. now must turn its attention to the European Commission -- the administrative arm of the European Union -- and its separate investigation of the software giant's possible anti-competitive behaviour.
On Friday, Microsoft is to present its response to the "statement of objections" that the EC issued in late August, in essence a list of the concerns and issues on which its investigation will focus.
Without a settlement, Microsoft will again be thrust into a legal forum, with an oral hearing slated to start in December.
EC spokesman Thorsten Muench said the U.S. deal will be part of the preparation for that hearing, assuming no settlement deal emerges in Europe. "Of course, we will be examining the details of the agreement," he said, while stressing that the European investigation is "factually and legally separate." The EC doesn't have the power to order a breakup of Microsoft, but it could fine the company up to $2.5-billion (U.S.) or order it to license the computer code for its operating system to other firms.
And the EC, under Mario Monti, has demonstrated that it is not afraid to cause substantial disruption to large companies if it believes competition will be harmed. European regulators were the ones who in July torpedoed General Electric Co.'s $41-billion takeover of Honeywell Inc., after the United States approved the deal with some conditions. "The EU has shown itself to be very aggressive," said Michael Geist, a professor of e-commerce law at the University of Ottawa.
But with the U.S. case on the verge of being settled, Microsoft is clearly hoping that a similar truce will be struck across the Atlantic. "We do think this agreement addresses the central issues being examined in Brussels as well as Washington," said Microsoft deputy counsel Brad Smith, who heads up the European antitrust case for the company.
Indeed, the settlement announced on Friday moves beyond the wording of earlier U.S. court decisions and on to territory formerly occupied only by European regulators. The proposed settlement explicitly names several types of "middleware" that act as interfaces between the Windows operating system and the Internet, including the Windows Media Player video and music player.
Windows Media Player was named in the statement of objections issued two months ago, sparking speculation then that the U.S. Department of Justice would seek to broaden the scope of its case.
Similarly, the deal announced last week lays out rules for how Microsoft will share some of the technology for its Windows 2000 software for powerful server computers, a prime area of interest for the EC. In August, the EC said it was concerned that Microsoft had withheld technical information about its server software from its competitors, an issue that the U.S. settlement would appear to address.
Yet, Steve Ballmer, Microsoft's chief executive officer, acknowledged on Friday that the U.S. settlement deal does not resolve all of the EC's questions. "Certainly, the commission has its own interests and issues it is looking at."
For instance, the EC said it believes Microsoft "may have acted illegally" by incorporating Media Player into the Windows operating system. But Microsoft's deal with the U.S. government gives the company a free hand to integrate Media Player and other software into Windows, although it does bar the company from using technical or contractual ties to force computer makers to promote such features.