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Europe closes in on Microsoft

By Kim Peterson
Seattle Times technology reporter

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If Microsoft is wondering how its antitrust case is faring in Europe, what happened yesterday in Brussels said it all.

Competition experts from 15 European governments were supposed to meet all day to discuss regulators' plans to go after the company for antitrust violations.

Instead, the conference wrapped up shortly after noon. No one raised any problems, sources familiar with the case said.

And at the end, the countries gave regulators a green light bright enough to be seen across the Atlantic Ocean. The representatives unanimously backed a draft decision against Microsoft by the antitrust arm of the European Union, and in doing so sent a message to Microsoft that could not be clearer.

The findings in Europe could ultimately hurt Microsoft in the United States, where it faces numerous private antitrust lawsuits from competitors, experts said.

A big thumbs up What happened: Competition experts from the European Union's 15 member states yesterday unanimously backed a draft decision by antitrust regulators that would force Microsoft to change the way it does business in Europe. The group's decision was largely an advisory one, but it bolsters the case that European regulators have been building for five years. What's next: The group is expected to meet again Monday to consider the size of the fine against Microsoft and possible changes in the way it does business.

"The fact that the EU has stood up to Microsoft and is seeking a fairly strong remedy and possibly heavy fines will have an indeterminate but significant impact on future antitrust proceedings in the U.S.," said Warren Grimes, an antitrust expert and a professor at Southwestern University School of Law in Los Angeles.

Europe is nearing the end of a five-year investigation into whether Microsoft committed antitrust violations by abusing its Windows monopoly. A draft decision has been circulated for weeks within the European Commission — the antitrust watchdog of the European Union — and could be completed by as early as next week. While details of that decision are not public, reports leaking out suggest regulators have found Microsoft guilty of antitrust violations in several areas.

Microsoft spokesman Tom Brookes said after the meeting that the company was still working to reach a settlement with the commission.

But unless it can do so, it potentially could be fined hundreds of millions of dollars. More damaging could be Europe's demands that Microsoft changes the way it does business on the Continent.

According to European news reports, the draft decision requires Microsoft to share proprietary information with rival server makers. In that way, Microsoft's competitors could make their server software work more smoothly with Windows-based personal computers.

The decision reportedly also would require Microsoft to offer computer makers a second version of Windows that does not contain its software to play audio and video clips. Regulators have heard concerns that by bundling a free media player with its dominant operating system, Microsoft is unfairly gaining ground in the digital-media market.

The aim is to free computer makers to sell Windows bundled with rival audio and video software such as RealNetworks' RealPlayer or Apple Computer's QuickTime, the sources say. Microsoft says the Windows Media Player is built into the operating system and removing it would cause damage. RealNetworks has used demonstrations at an EU hearing to argue it can be removed.

The case is broader than the antitrust suit the U.S. Department of Justice settled with the company in 2001. That settlement, widely viewed as a victory for Microsoft, focused on Internet browsers and other technologies, but not on the Windows Media Player.

While the two sides could still settle the case, a competition expert said a compromise would be tough.

"The commission's already got the opinion of the member states that these are the right remedies. To substitute different remedies now would be very difficult," said David Wood, a competition lawyer with Howrey Simon in Brussels.

The EU advisory committee will meet Monday to decide whether to endorse the proposed fine, with the commission's final ruling likely coming two days later. Microsoft will almost certainly appeal any negative ruling.

Kim Peterson: 206-464-2360 or kpeterson@seattletimes.com.

Material from The Associated Press is included in this report.

Copyright © 2004 The Seattle Times Company