Europe Might Not Let Bill Gates Off So Lightly

For Microsoft Corp, the finish line appeared to be within sight. The five-year-old

antitrust battles in Washington came to an end last year with a ruling that barely rapped

the software giant on the knuckles. And in the sprawling Eurocracy in Brussels, word had

it that Europe’s competition commissioner, Mario Monti, was just weeks away from

resolving Europe’s three-year-old antitrust tussle with Microsoft. But any illusions

of a speedy wrap-up ended in late January with a resounding thump. That was the sound of a

new complaint against Microsoft landing on Monti’s desk.

More? Yes, and for a powerful reason. A grouping of Microsoft’s rivals, including

Sun Microsystems, AOL Time Warner, Nokia, and Oracle, are angling with this new complaint

to push Monti toward a much sterner ruling. They argue that Microsoft, now more than ever,

is using its Windows monopoly to establish dominance in other markets, from instant

messaging to digital moviemaking software. And to resolve this, they want Monti to force

Microsoft to tear out the applications, stripping Windows down to the bare essentials.

"These markets are under threat," says Ed Black, president of the

Washington-based industry group leveling the complaint, the Computer and Communications

Industry Association. "For us to wait for all these markets to be destroyed is

ridiculous."

For Microsoft, the prospect of tearing apart Windows is anathema. Much of the

company’s PC strategy, and the very basis of its popular Windows XP operating system,

is to provide users with a host of seamless applications. And when US District Judge

Colleen Kollar-Kotelly upheld the company’s settlement with the US Justice

Department, an exultant Chairman William H Gates III said the deal permitted Microsoft to

add new features to Windows. "It gives us the freedom to innovate, which we’ve

said is a very central thing."

It’s precisely that freedom that competitors want to limit. And Monti’s

division, with its ongoing case against Microsoft, is the logical venue. With his vast

powers that extend across the entire European market, Monti has the clout to humble even a

giant. For three years the commissioner and his staff have been developing an antitrust

case against Microsoft based largely on the bundling of Microsoft’s Media Player into

the Windows 98 operating system. The new complaint, focused on Windows XP, is technically

unrelated to the ongoing case. But the plaintiffs, say Brussels insiders, are hoping it

will tip the balance against the company. "It could provide a new stick with which

the commission can beat Microsoft," says Jacques Bourgeois, an antitrust lawyer at

the Brussels office of Akin Gump.

Microsoft, says a spokesman, views the new charges as "tired and old

arguments." But if they lead Monti to consider unbundling, Microsoft is sure to

battle with Darwinian fury. By comparison, Monti’s other remedies look mild. Monti

could fine MS as much as 10% of annual revenue, or $2.8 billion.

Wherever he takes the case, Monti is treading new ground. Relevant case law in Europe

is scarce. But one precedent is clear: In Europe’s Microsoft case, the complaints

keep coming.

By Jay Greene in Seattle, Andy Reinhardt in

Paris, and Mike France in New York in BusinessWeek. Copyright 2003 by The

McGraw-Hill Companies, Inc