EU extends Microsoft antitrust probe, delays ruling

The European Commission said Thursday that it is seeking more evidence to strengthen its antitrust case against Microsoft. The move will delay any final ruling in the five year-long case.

The European Commission said Thursday that it is seeking more evidence to strengthen its antitrust case against Microsoft. The move will delay any final ruling in the five year-long case.

The Commission, which is responsible for policing competition in the 15-member European Union, sent a questionnaire to music and movie companies, asking them about how they view the technologies they use to disseminate their material over the Internet.

The Commission accused Microsoft of stifling competition in the market for media player software in 2000 by bundling its Media Player software into its ubiquitous Windows operating system, to the detriment of rivals such as Apple’s QuickTime and RealNetworks’ RealPlayer.

“We had some outstanding issues and decided to investigate these issues further,” said Commission spokeswoman Amelia Torres.

The bundling argument has become one of two core elements in the Commission’s case against the software maker, the other being that Microsoft has leveraged its dominant position with Windows on desktop machines to muscle out competition in the related network server market.

The latest request for information will “add to the length of the proceedings,” said Peter Alexiadis, a competition lawyer in the Brussels office of Squire Sanders & Dempsey.

A delayed ruling may be advantageous to Microsoft, and Windows. Rival server systems that use Linux are forecast to gain market share at Microsoft’s expense, according to the technology market research firm Gartner.

The threat from Linux systems was evident in an aggressive internal memo sent by Microsoft’s sales director Orlando Ayala to senior colleagues worldwide last year. He advised colleagues to offer hefty discounts, or even offer server versions of Windows for free in order to win big contracts from governments around the world, adding “under no circumstances lose to Linux.”

And in a note to staff worldwide, Microsoft CEO Steve Ballmer this week acknowledged that Linux is a big threat to Windows. 

If Linux has made significant inroads into the server software market by the time the Commission concludes its antitrust probe, then the European regulator may have to back down from the tough position it outlined in its statement of objections.

The latest delay has taken some people following the case by surprise. Competition Commissioner Mario Monti said last year that the Commission’s file on Microsoft was complete and hinted that the case would conclude by the end of that year.

Since then Commission officials have indicated that the ruling could be expected during the first half of this year. Two months ago officials said the case wouldn’t conclude until after the August recess.

Microsoft welcomed the Commission’s move. “We view the request for and review of market information as positive, as it will reflect the healthy level of competition in the marketplace,” a company spokesman said.

Some competition lawyers following the case see the latest delay as a sign that the commission wants to make its case completely watertight. Last year Monti’s team was accused of sloppiness by the Court of First Instance, which overruled three important merger prohibitions by the commission.

“You tend to be much less blasé with probity of evidence when you’ve been thumped by the court like that,” said Alexiadis.

Other lawyers interpret the latest delay as a sign that the Commission is getting cold feet over the case, which is by far its most important antitrust case it has ever handled.

“The subject matter is complex, the market is very dynamic, there are controversial theories such as bundling involved,” said one lawyer who asked not to be named. “Perhaps the commission wants to see Linux dilute Microsoft’s dominant position before ruling because it fears the legal appeal that would inevitably follow if the commission’s ruling went much further than last year’s ruling in the United States,” the lawyer added.

If responses to the latest commission questionnaire throw up new evidence, the Commission may have to issue a new statement of objections, lawyers agreed. “If that were to happen a conclusion to the case could be over a year away,” one said.