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Story URL: http://management.silicon.com/government/0,39024677,11028113,00.htm

Microsoft faces huge fines for anti-trust
Letters of support written by software giant itself, EC alleges...

By Suzanna Kerridge

Published: Wednesday 10 October 2001

A confidential document outlining the EC's case against Microsoft accuses the software giant of obstructing the investigation into anti-trust allegations.

The attempt to obstruct investigators means the EC could seek to severely punish the software giant. Fines as high as 10 per cent of Microsoft's annual revenue, $2.5bn, have been mentioned by the document leaked to the Wall Street Journal.

Under the spotlight is the allegation that the 34 letters presented by Microsoft to the EC purporting to show customer support for its business practices were, in fact, mainly written by the software giant.

Many companies weren't even aware their names were being used as evidence, the Commission said.

The document accuses the company of perpetuating abusive and discriminatory licensing policies. It also attacks the company's refusal to provide interface information necessary to compete.

Also under attack is Microsoft's bundling of new features into Windows and Windows server software. The decision to bundle has a damaging effect on innovation and competition, said the document. It also makes it clear that Windows XP will be under future investigation.

Thomas Vinje, partner at Morrison & Foerster Brussels and advisor to the EC's investigation into Microsoft, said: "Such a high fine is theoretically possible. The commission will look at whether this is the latest in string of violations, if the company is a repeat offender and the economic impact in terms of the competitive structure."

Vinje added that while the end result is impossible to predict, historical evidence shows that the vast majority of statement of objectives lead to adverse results for the company in the dock.

EU competition commissioner Mario Monti said talk of fining Microsoft is "premature" claiming it is only a "possibility".

Over recent months, Vinje has claimed anti-competitive behaviour is "programmed into the DNA of Microsoft".

"They don't know how to do business any other way. They can't imagine any other world, they simply must keep marching to that drum," he said.

The EC has also been closely following events in the US anti-trust case and this is likely to influence the European case.

"If the US reaches a resolution through a settlement or litigation that address the fundamental concerns, then the EC might not pursue the case as aggressively.
But if the EC concerns are not addressed then it will feel the necessity to continue its case. This is very likely to happen because while the cases are related they are different."

The EC's case addresses the issues surrounding Microsoft's position in the low-end server market as well as the company's practice of bundling software.

Microsoft is expected to respond to the allegations next month. A formal hearing is expected to be set for the end of December, according to Vinje.