Will Microsoft's moves chafe Europe?

Microsoft's moves into the security software market could be an agitator for more antitrust concerns over how it uses its market strength for other software offerings.

Recently, the company announced a new product for businesses called Microsoft Client Protection, a beta version of which will be released before year-end. Also in the pipeline is Windows OneCare Live, an anti-virus and spyware product due for a public beta release later this year.

The products are the fruit of Microsoft's commitment more than two years ago to offer anti-virus products, which included acquiring anti-spyware technology and firms such as Sybari Software earlier this year and the Romanian anti-virus software developer GeCAD Software SRL in 2003.

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Microsoft's moves into the security software market could be an agitator for more antitrust concerns over how it uses its market strength for other software offerings.

Recently, the company announced a new product for businesses called Microsoft Client Protection, a beta version of which will be released before year-end. Also in the pipeline is Windows OneCare Live, an anti-virus and spyware product due for a public beta release later this year.

The products are the fruit of Microsoft's commitment more than two years ago to offer anti-virus products, which included acquiring anti-spyware technology and firms such as Sybari Software earlier this year and the Romanian anti-virus software developer GeCAD Software SRL in 2003.

One European antitrust lawyer sees the move into security software as another attempt by Microsoft to take advantage of its strength in operating systems to extend that strength into neighboring markets.

"It's the classic issue of what is the end of the legitimate scope of Microsoft's dominance," says Anthony Woolich, head of the European Union competition team at Lawrence Graham LLP in London.

Microsoft's Windows Vista operating system will have security features that help protect computers from viruses, worms and spyware, according to the company's Web site.

But what security features will be in Vista and how those are tied to the operating system and interact with other products could be key.

The company plans to sell OneCare as an add-on annual subscription for Windows XP and Vista, says Rebecca Smith, spokeswoman.

Complaints against Microsoft in the European Commission last year showed that if a product can be sourced independently, "that would suggest it is a separate market," Woolich says. It would mean a potential argument that security features are an integral part of an operating system may not apply in an antitrust battle, he says.

Symantec said recently that it has provided information to the European Commission. Jonathan Todd, spokesman for European Union Competition Commissioner Neelie Kroes, says as a matter of practice he can't confirm ongoing investigations by the Commission.

Symantec CEO John Thompson last week confirmed documents were given to the Commission but sought to dampen speculation that a court fight was brewing. Symantec's relationship with Microsoft is one of "mutual dependency," he says, adding that the company is not involved in a Commission investigation.

An earlier investigation into software bundling led, in May 2004, to the Commission ordering Microsoft to sell a version of Windows without its Media Player software and to offer licensing protocols used by its workgroup server software. The company was fined a record $596 million.

The ruling found that Microsoft abused its dominant market position by bundling its Media Player software with its operating system without a legitimate business justification. The decision is on appeal to the European Court of First Instance.

But the ruling by the Commission only applied to Microsoft's bundling of the Media Player software, says Davina Garrod, a competition and regulatory lawyer with McDermott Will and Emery in London.