Europe continues Microsoft investigation, reacts to US moves

The European Commission has confirmed that part of its ongoing Microsoft investigation concerns the same issue raised by the US Department of Justice - the effective bundling of Microsoft's operating system with its browser. A previous EC investigation into Microsoft that ended in 1994 did not bar Microsoft from putting integrated products on the market, says an official, but it does bar Microsoft from 'making the purchase of an operating system conditional on the purchase of another product.'

This week's US Department of Justice moves against Microsoft are much in sync with ongoing activities and attitudes in Europe.

Industry officials contacted here in reference to the DOJ's request that Microsoft be charged US$1 million daily for requiring PC manufacturers to distribute Internet Explorer as a condition of licensing Windows 95, spoke of the US company as a "monopoly," and mostly looked to the U.S. and European governments to take the appropriate action.

The European Commission meanwhile confirmed that part of its ongoing Microsoft investigation concerns the same issue raised by the DOJ - the effective bundling of Microsoft's operating system with its browser.

"Commissioner Van Miert's competition division is still analysing a series of these contracts concerning Microsoft and [competing] Internet providers," said a commission official. "[These contracts] may have the same effect as those denounced by the Department of Justice, namely the foreclosure of that market. The European Commission is maintaining close contact with the Department of Justice."

"It is too early to say what we will do," the official continued. "Contrary to the US, the European Union does not have the possibility to introduce daily sanctions," although it can go to the European Court of Justice and ask for an injunction to stop a given practice, he said.

A previous EC investigation into Microsoft that ended in 1994 did not bar Microsoft from putting integrated products on the market, the official noted, but it does bar Microsoft from "making the purchase of an operating system conditional on the purchase of another product."

Microsoft's market position is not currently an issue for Vobis Microcomputer AG, a German PC manufacturer and retailer, according to spokeswoman Janet Spacey-Rennings, although she sees the company as dominating the market.

"At the moment we have nothing to argue about [with Microsoft], but we are dealing with a couple of big monopolies in the market - Intel and Microsoft - and I don't see that changing," she said.

Customers buying a PC at Vobis shops in Germany have a choice between Netscape Navigator, which is preloaded on new PCs, and Microsoft Explorer, which comes on a CD in the software bundle, Spacey-Rennings said. "You've got freedom of choice. Anybody who doesn't want [Explorer] doesn't have to take it," she added.

"If Microsoft isn't able to bundle [Explorer] anymore it will strengthen the competition - Netscape and others - and that will strengthen market," commented Frank Sempert, a Frankfurt-based consultant whose company, SEC BV, helps businesses with strategic software projects.

"At least it's to our benefit," Sempert said, adding that Europeans are interested in the outcome of the "browser war" especially because of the expected growth in e-commerce.

"The browser will be more and more important as digital commerce comes along," agreed Jane Doorly, vice president and director at Dataquest Europe in London. "I am sure Microsoft already has a quasi-monopoly on operating systems right now. It seems like [the Justice Department] is picking its battles where they have a chance of winning."

Responding to the argument that it is too difficult for Microsoft to separate its operating system out from its browser, a principal consultant with Ovum Ltd. in London said "That's nonsense."

"That's simply the way Microsoft has driven its business," said Ovum's John Moroney. "It's like saying 'The rules of the road stop me from getting from London to Edinburgh in an hour.' Tough, that's the way it is. This is the price you pay for entrance to the market."

When the whole matter has passed, it may simply mean a greater separation between Microsoft's operating system and its browser - which could be good news both for users and Microsoft.

"This shows there are significant moves to unbundle the stuff and that the Americans are equally keen to develop a competitive market," Moroney said. "A big company can use economies of scale to dominate the market [but Microsoft] is going to have to separate [the browser and the operating system]."

"They try to integrate things to the nth degree," Moroney added. "But breaking it up might be to their advantage. In the long run, the Americans and Europeans don't have too different a view of it."

(Margret Johnston in Munich, Elizabeth de Bony in Brussels, and Joanne Taaffe in Paris all contributed to this report.)

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