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MARCH 18, 2004
What's Microsoft Up Against in Europe? [Page 2 of 2] So why is this ruling such a big deal? The long-term implications are daunting for Microsoft. Once Monti rules that it has abused its dominant market position by bundling new applications into Windows, Microsoft has to be very careful about adding any new features to its operating system. What's more, the precedent-making ruling could make it easier for the EU to bring future actions against Microsoft. However, each case would have to be prosecuted on its individual merits, including detailed economic data and analysis. It doesn't give the EU carte blanche to ride Microsoft's back forever. How about the EU charges involving Microsoft's server software? Competitors say Microsoft uses "secret handshakes" between Windows and its other software so it can provide more features and better performance for computer users than its competitors can. This piece of the ruling would give rivals a fairer chance of competing with Microsoft's applications and its server software. RealNetworks, for instance, sells server software that sends streams of audio and video signals to computer users via the Web that competes with Microsoft's server software. Will this ruling help consumers? It may seem counterintuitive that pulling technology out of Windows could be good for consumers. But the EU is thinking long-term here. Microsoft has a tremendous advantage over rivals since it can add new features to its Windows monopoly and get the broadest possible distribution. Without that distribution, rivals stand little chance of competing or convincing third parties to support their alternative technology. European regulators worry that competitors won't even try to square off with Microsoft if its ability to add features to Windows remains unchecked. Their hope is that the ruling will embolden future players, who in turn will bring more choice and more innovation to consumers. But the ruling will apply only to Europe, right? That's true. And that could limit its impact. Microsoft will continue to add new features to Windows in every market, including the world's largest, the U.S. But if the alternative version of Windows proves successful in Europe, PC makers could press Microsoft to make it available elsewhere. And disclosing information about how Microsoft's operating system interacts with other programs will help rivals throughout the world, not just Europe. What's more, European regulators will have put Microsoft on notice that its long-standing business practices won't be brushed off in the future, and that could have broad impact in the way it develops software worldwide. Will the EU be back with other complaints against other U.S. tech companies? Anything is possible, but the EU doesn't seem bent on pursuing companies from the U.S. or anywhere else just for the fun of it. The legal mandate of the EU's Competition Directorate is similar to that of the U.S. Justice Dept. and Federal Trade Commission: It reviews pending mergers and acquisitions, prosecutes cartels and price-fixing, and enforces antitrust laws that are similar in scope to those in the U.S. The EU has the right to bring cases against any company doing business in Europe, no matter where it is headquartered. So if it believes that another U.S. company is behaving as an abusive monopolist, it could launch another probe. The only other American tech giant on the EU's radar right now: Oracle (ORCL ), with its proposed hostile takeover of PeopleSoft (PSFT ), which the EU is moving to disallow. But so is the Justice Dept.
 By Jay Greene in Seattle, Steve Hamm in New York, and Andy Reinhardt in Hannover, Germany Edited by Douglas Harbrecht
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