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Jewish World Review April 26, 2001 / 4 Iyar, 5761

Victorya Hong and Boris Grondahl

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Europeans also investigating Microsoft

http://www.jewishworldreview.com -- Microsoft may like to pretend the antitrust battle was a bad dream, but Bill Gates and company shouldn't relax just yet.

Even as the Bush Justice Department shows little enthusiasm for the case, European Competition Commissioner Mario Monti continues to pursue his own investigation. The worst-case scenario: The software giant could face another breakup order.

The European Commission investigation is very different from the one brought by the Clinton administration. "The U.S. case is about Microsoft maintaining its monopoly. The EC case is about extending (that monopoly) to the server market," says Peter Willis, a senior associate with the London law firm Taylor Joynson Garrett. The firm is not involved in the case.

Essentially, Microsoft is charged with abusing the dominant position of its Windows operating system (92 percent of PCs worldwide run Windows) to create a lock on the server software market.

The EC has two investigations into Microsoft. The first was filed in 1998 after Microsoft refused to disclose technical data about its Windows software to its competitor, Sun Microsystems. Sun is dependent on the data to enable its systems to communicate with Windows PCs in corporate networks. The EC validated Sun's complaint in August 2000 by sending Microsoft a formal "statement of objections."

In February, it launched a second preliminary investigation into the company after corporate users complained that to make Windows 2000 function properly, they had to purchase Windows 2000 for servers.

Microsoft favors combining the cases, and given the similarities between the two complaints it would seem to make sense. But the EC may decide to keep them separate for tactical reasons. Once a strategy is chosen, a formal hearing would follow, and then a decision is likely by the end of the year.

Unlike the Justice Department, which has had to argue its case before the U.S. courts, the European Union's antitrust force acts as judge, jury and executioner. Only after it has made a decision can Microsoft challenge it at the European Court of Justice. If the EC rules against Microsoft, it could impose a number of penalties. It could levy a stiff fine - under EU law it could be up to 10 percent of Microsoft's $23 billion in global sales - though the EC has never imposed such a high penalty. The commission could order Microsoft to open up its interface information or even the Windows source code.

The EC could also insist on Microsoft's breakup - most likely by splitting its PC and server business - but that, says Michael Tscherny, a spokesman for competition commissioner Monti, "would only be a weapon of last resort, a nuclear bomb if you like, and it would only be imposed if no other conditions were possible."

Still, "there are certainly some people who say that if the U.S. doesn't split Microsoft, the commission should," says a lawyer involved in the case. Willis of Taylor Joynson Garrett adds: "If the commission thinks that Microsoft has a deliberate policy decision to force out competitors, this might be a strong reason."

The commission's powers are not confined geographically, notes Willis. "It wouldn't just split Microsoft's European operations; it would split its worldwide operations."

Victorya Hong and Boris Grondahl write for The Industry Standard. Comment by clicking here.

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