EU Merges, Expands Antitrust Probes Against Microsoft

BRUSSELS, Belgium – European Union regulators widened their investigation into Microsoft on Thursday, warning that the U.S. software giant may be violating antitrust laws by tying its Media Player into its Windows operating system.

The commission also alleged Microsoft may have used illegal practices to extend its dominant position in the market for personal computer operating systems into the market for low-end server operating systems.

The EU's executive arm said a formal statement of objections was sent to Microsoft following an investigation into its Windows 2000 operating system launched last February.

That probe, it said, also has been merged with another case that began in 1998 following a complaint from rival Sun Microsystems regarding servers.

The commission sent a statement of objections to Microsoft regarding the Sun case last year and is examining the company's reply.

The latest objections add "a new dimension to the commission's concerns that Microsoft's actions may harm innovation and restrict choice for consumers," the commission said.

Microsoft has two months to respond to the commission. A Microsoft spokesman had no immediate comment.

Last year, a U.S. federal judge ruled the company had violated antitrust laws and ordered Microsoft to be split into two. An appeals court upheld his finding of antitrust violations but overturned his breakup order, and Microsoft also has appealed to the Supreme Court.

The U.S. judge had also ruled that Microsoft's bundling of the Internet Explorer Web browser with its Windows operating system was illegal, but a federal appeals court sent that matter back to the lower court.

A trade group representing Sun and other high-tech giants, including AT&T, America Online and Oracle, welcomed the EU's action, but warned delays would allow Microsoft to keep grabbing market share.

"Unfortunately, while this case has been pending, the competitiveness of the server market has seriously deteriorated," the Washington-based Computer and Communications Industry Association said in a statement.

Commission spokeswoman Amelia Torres stressed that the EU probe is "factually and legally separate" from Microsoft's problems in the United States. But she said the U.S. Justice Department was informed beforehand about the EU's move.

She said the EU was not planning to ask for a delay in the launch of Windows XP, a new operating system scheduled to hit stores in October, or to seek any other interim measures while the investigation continues.

One new aspect of the probe involves Microsoft's Media Player, which allows consumers to see and hear audio and video files.

By illegally tying the product into its dominant Windows lineup, Microsoft may be depriving computer makers and consumers of "free choice" over which brand of player they want to use "as there are no ready technical means to remove or uninstall" it, the commission alleged.

Media players are important because they will "play an important role with a view to making Internet content and electronic commerce more attractive," Competition Commissioner Mario Monti said.

The commission said Microsoft also may have illegally extended its dominant position in the market for personal computer operating systems into the market for low-end server operating systems. Such cheaper servers are usually used by companies to network personal computers, and as Web servers.

Specifically, Microsoft may have withheld from outside software vendors key information that they need to enable their products to "talk" with personal computers running on Microsoft Windows, the commission alleged.

Microsoft may also be using an "abusive licensing policy" for Windows 2000 to help extend its dominance from personal computers to servers, it said.

If customers choose not to use only Microsoft for both computers and servers, but decide to use competing server products, they are forced to pay more, the commission said.

"Server networks lie at the heart of the future of the Web and every effort must be made to prevent their monopolization through illegal practices," Monti said in his statement.