EU antitrust regulators accuse Microsoft of abuse

BRUSSELS, Belgium -- Microsoft is still trying to monopolize new markets even after settling the landmark antitrust case in the United States, the European Union charged Wednesday as it prepared to demand its own concessions from the U.S. software giant.

The EU's antitrust watchdog, the European Commission, said recent surveys of more than 150 businesses that use Microsoft products showed that "Microsoft's abuses are still ongoing."

The Commission offered the company a "last opportunity" to defend itself or agree to open up the two markets under scrutiny: low-end servers, which tie desktop computers together, and media players, vital software as digital video and audio distribution expands on the Internet.

"We have reserved the possibility to levy fines," said EU spokesman Tilman Lueder.

The EU can fine violators up to 10 percent of their worldwide sales -- a figure that could reach into the billions for Microsoft.

"We have so much material now and we have such a strong case, that from our perspective the legal and factual analysis is complete and allows us to adopt a final decision," Lueder said of the EU's nearly four-year investigation.

The EU will hold off until it sees Microsoft's response, due by the end of September, he said.

Microsoft spokeswoman Tiffany Steckler in Paris called the EU action "unfortunate" and refused to comment on whether the company would make concessions.

Legal maneuvering

The EU's new "statement of objections" -- the third it has issued against Microsoft -- seeks to bolster its case so as to avoid a legal backlash. In three court defeats last year, EU trustbusters were criticized by judges for sloppy casework.

The EU also has been treading carefully to avoid another trans-Atlantic row like the one that followed its unprecedented 2001 veto of a merger between General Electric and Honeywell that had already been approved in Washington. That decision is under appeal.

"They want to make sure their case is as bombproof as they can make it," said Martin Baker, an antitrust lawyer in London.

Microsoft argues that last year's U.S. settlement, combined with additional steps it has taken voluntarily, answer the European complaints. Microsoft agreed then to disclose some of its software code to rivals and to allow computer makers to hide icons for some Windows applications, a move that would boost exposure of competing software.

But Microsoft rivals dismissed those moves as insufficient and have pressed the EU to demand more -- something it seems ready to do.

The EU accuses Microsoft of using the "overwhelmingly dominant position" Windows enjoys on personal computers to help it muscle into the expanding market for low-end servers.

Sun Microsystems Inc., IBM Corp. and other companies complain that Microsoft designs Windows to work better with its own server software than rival offerings, giving it an unfair advantage.

Lueder said the issue of "full interoperability," especially in server-to-server software, was raised by an "overwhelming majority" of respondents to its business survey -- yet is not addressed in the U.S. settlement.

"There we see still room for action," he said.

The EU also alleges that by building its Media Player into Windows, Microsoft is pushing out rivals such as Apple Computer Inc. and Real Networks Inc., which also make software that plays digital video, clips, music and such newer content as Internet radio.

The media player dispute echoes the browser war in the U.S. proceedings between Microsoft and Netscape -- in which Netscape was the innovator and was crushed as Microsoft leveraged its operating system dominance to favor its Internet Explorer. The EU said its survey of music and movie companies, as well as software developers, found that "ubiquity" of Microsoft's Media Player weakens competition and "stifles product innovation and ultimately reduces consumer choice."

The EU, for example, determined that online publishers are increasingly embracing Microsoft's proprietary data formats because Media Player is already built into most recent versions of the Windows operating system, said one industry executive familiar with the probe who spoke only on condition of anonymity.

The EU proposes that Microsoft offer a version of Windows without the Media Player or include rival players with Windows.

Microsoft also would have to disclose more of its prized software code so competitors in the server market could design products that work as seamlessly with Windows as Microsoft's own.

Microsoft has balked at giving away what it considers proprietary information.

"We don't want them to reveal the entire working of their system," Lueder said. "We only want them to reveal that protocol information that is required for them to fully interoperate."