Economy & Trade, Europe, Headlines

FINANCE: EU Likely to Act Against Microsoft

Stefania Bianchi

BRUSSELS, Mar 16 2004 (IPS) - A European Union ruling against the computer giant Microsoft looks likely, following an approval by the bloc’s member states.

The 15 member states of the European Union (EU) cleared the way Monday (Mar. 15) for the Competition Commission to penalise the computer giant with sanctions and a fine.

A five-year investigation into Microsoft is due to end next week over claims that it breached EU competition laws.

The European Commission, the EU executive, will rule Wednesday (Mar. 24) whether the computer giant has abused its computer software monopoly. The EU’s anti-trust laws give it power to investigate companies believed to impair competition between rival products.

Microsoft is the biggest computer operating system in the world, with nine out of 10 personal computers (PCs) said to run on its software.

The company could face a fine of hundreds of millions of dollars if the EU rules against Microsoft. It may also be forced to change the way it sells its Windows software within the EU.

Several reports indicate that Microsoft will be forced to share proprietary details with rivals and provide a second, stripped-down version of its Windows system. Given the size of the EU market, such an order could have global implications for Microsoft.

Such a ruling looks increasingly likely after a meeting Monday of national anti- trust experts from the EU’s 15 member states to discuss the Commission’s draft proposal to impose sanctions on the company.

National competition bodies discussed what anti-trust violations Microsoft is guilty of and what remedies it should be compelled to undertake.

Member states voted unanimously to back the ruling.

The same panel of experts is expected to meet or conduct a conference call next Monday (Mar. 22) to decide what, if any, fines Microsoft should face.

Local reports estimate that the proposed fine could be anything from 120 million dollars to twice that figure.

Under EU rules, the Commission can fine a company as much as 10 percent of its global annual sales, which in Microsoft’s case are estimated to be some 3 billion dollars.

EU officials declined to speculate on the fine. "Mentioning an amount (for a fine) at this stage is totally speculative because it has not been calculated yet," Amelia Torres, spokeswoman for EU competition commissioner Mario Monti told journalists Monday.

Torres indicated however, that Monti is primarily interested in market remedies to redress the distorting effects of Microsoft’s domination software, rather than securing a big payout.

Microsoft and the EU have tried and failed to reach agreement on the issue, which has dragged on since the early 1990s.

One of the main complaints against the computer giant is that it pushes rivals out of the internet and media player market.

The EU believes that Microsoft’s practice of including media player with its Windows system, which allows users to download sound and video clips, is an abuse of its dominant market position.

The media player handles sound and visual data, such as radio and television streams and MP3 files – a function that has become important for PC users in the multimedia age.

Brussels says the firm was illegally incorporating its media player into its Windows operating system to the detriment of rival software by Real Networks, Apple and others.

If the final ruling goes ahead as proposed, then rival brands of audiovisual software could be built into Microsoft’s Windows operating system and the company would have to offer consumers a choice of buying Windows with or without the company’s own audiovisual software.

Microsoft says it is merely meeting consumer demands for new features, but the Commission argues that "tying" two products together prevents competition.

Although Monday’s decision by the EU’s member states is not binding, their support means that it is unlikely that Monti will change his draft proposal.

An appeal could be made against the judgment to the EU Court of Justice in Luxembourg.