EU on course to rule in Microsoft probe

The European Commission has given its strongest indication yet that it plans to punish Microsoft. for abusing its dominant position in the operating systems software market in Europe.

"At this stage, in spite of Microsoft's claim that what they do is to the benefit of consumers and innovation, I am not sure that their concept of interoperability and their market behavior ensure a competitive scenario," said Commissioner for Competition Mario Monti speaking Friday in Washington, D.C.

Monti is close to finishing his evaluation of roughly 9,000 pages of evidence submitted by the company last November as its official response to the Commission's first antitrust case opened last August. That investigation was sparked by a complaint from Sun Microsystems in 1998 that Windows versions for PCs -- prior to Windows 2000 -- were designed to favor Microsoft server software over rival server software packages.

The Commission "will soon be in a position" to take legal action based on a second investigation, a Commission source said Tuesday, speaking on condition of anonymity. The Commission is unlikely to issue proceedings before the end of this month, the source said.

The European Commission is the executive body of the 15-member European Union. One of its main responsibilities is to regulate competition in the Union.

The second investigation began in February 2000 and is almost identical in substance to the Sun case, but was initiated by the Commission itself. It focuses on whether Microsoft is using its dominance with Windows 2000 to muscle out other players in the server market.

Since the new case was opened, many of Microsoft's competitors, as well as small and medium-sized companies dependent on Microsoft's products, have complained to the Commission about the effects of Microsoft's dominating position in the OS software market.

It would normally take about 2 years for a Commission antitrust investigation to result in formal legal action. The second Microsoft investigation is entering its 14th month.

Lawyers close to the Commission said that an early conclusion to the second investigation makes the merging of the cases more likely. Many say the EU executive's competition arm is already planning to merge them. Doing so would allow a quicker conclusion than conducting two separate lawsuits, they say.

"Merging the cases would make a lot of sense from both sides' point of view, said Jacques Bourgeois, competition lawyer with law firm Akin Gump Strauss Hauer & Feld. "It has been done before."

Bringing the evidence in both cases together "would not only speed up the whole process, it would improve the chances of the commission winning because it would reveal a pattern of behavior,'' said Maurits Dolmans, a lawyer with Cleary Gottlieb Steen & Hamilton.

Neither Bourgeois nor Dolmans is involved in the Microsoft case.

Microsoft has requested a hearing with the Commission in the Sun case. The Commission said it has almost finished examining the company's lengthy written response but has not yet set a date for a hearing. If the cases are merged, then a hearing for the first case will be postponed until a date can be set for a hearing of all evidence from both cases.

Microsoft has indicated that it prefers the cases be merged, but has declined to comment officially.

If the Commission rules against Microsoft, it can fine the company up to 10 percent of annual global sales. Microsoft made sales of just under US$23 billion in 1999. Theoretically, two separate cases would allow the Commission to fine up to 10 percent twice. But Brussels lawyers said that it cannot be assumed that two fines would be larger than one.

The Commission's investigation differs from the US government's antitrust case against Microsoft, which contended, among other things, that Microsoft had used its dominance in PC operating systems to weaken Netscape Navigator and Sun's Java system. A federal judge ordered Microsoft split into two parts and imposed restrictions on its business practices. That ruling is under appeal.

The Commission can be reached at +-32-2-299-11-11 or found on the Web at http://europa.eu.int/.

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