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MARCH 16, 2004
By Andy Reinhardt High Noon for Microsoft in Europe Five years after they began probing the bundling of Media Player with Windows, the EU's antitrust probers are poised to reveal their findings Tick, tock, tick, tock. That's the sound of the clock counting down for Microsoft in Europe, where on Mar. 15, regulators moved a step closer to finding it guilty of antitrust violations. Behind closed doors in Brussels, the European Union's Competition Directorate, under the leadership of steely Italian lawyer Mario Monti, presented to the heads of the competition agencies from each of the EU's 15 member states the results of its five-year investigation. According to a statement from Monti's office, the national competition authorities unanimously approved the finding. On Mar. 22, the 15 competition heads will meet again to review Monti's proposed remedies and sanction a fine that could run to the billions of dollars. The final decision will likely be announced a few days later. TWO VERSIONS. The EU alleges that Microsoft (MSFT ) has unlawfully benefited from leveraging its monopoly in personal computer software. By bundling Media Player audio- and video-playback software into the Windows operating system, the pan-European competition authority charges that Microsoft has reduced choice in the nascent digital-media industry for content producers, consumers, and rivals such as RealNetworks (RNWK ) and Apple (AAPL ). And by refusing to disclose critical technical details about the interaction between Windows desktops and servers, Microsoft allegedly made it impossible for competitors such as Sun Microsystems (SUNW ) and Novell (NOVL ) to play on equal terms in networks of Windows PCs. The specifics of the proposed ruling have yet to be made public. But informed sources in Brussels say Microsoft will be ordered to produce two versions of Windows, one with Media Player and one without, each of which would be offered at different prices to PC makers. This would allow manufacturers to sell PCs equipped with Windows and, say, RealOne or QuickTime, but not Microsoft Media Player. HIGH STAKES. It's unclear whether PC makers -- or their customers -- would favor such a version of Windows without Media Player. On the server issue, Microsoft would be required to provide more information about the technical details of how desktop PCs and servers communicate, which rivals would be able to obtain for a fee. Microsoft says it's still trying to negotiate a settlement. But with only nine days to go before the full European Commission -- the executive body of the European Union -- is expected to approve the ruling, time is running out. "We continue to be actively engaged with the commission in the hope of settling this amicably," says Microsoft spokesman Lou Gellos. Spokespeople for the European Commission couldn't be reached. CD SOLUTION? It's easy to see why a negotiated settlement could be attractive to both sides. The commission, though perhaps concerned that an agreement might signal it was backing down, would get a final result that avoided endless appeals. A settlement also could include requirements that Microsoft change its practices globally, not just in Europe. For Microsoft, a deal would put legal uncertainty behind it, and it could obtain a remedy more palatable than the full unbundling of Media Player and disclosure of server-interface specifications. Where do things stand in the negotiations? At the beginning of 2004, Microsoft told the commission it was prepared to bundle copies of competing media players on the CD-ROM discs shipped by PC makers. The idea was to provide consumers with ready alternatives to Media Player. Recent news reports claim the commission rejected the offer as insufficient. A Microsoft spokesman in Brussels says the idea has not been dismissed outright, however. Rather, "it remains one of many options being considered as part of the negotiations," he says. Microsoft's hope is that bundling rival media players on a CD-ROM could be part of a "broader approach" to addressing the EU's view that Microsoft must support rival media players.
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