EU opens Win 2000 inquiry

The European Commission announced it has launched an inquiry into allegations that Microsoft Corp. introduced new elements into Windows 2000 designed to help it expand its dominance, in an anti-competitive manner, from desktop PC operating systems to other areas, notably servers.

“We have received information from end users, Internet service providers and competitors that Microsoft has designed Windows 2000 so that it can leverage its position on (PC) operating systems to other markets such as servers and ultimately electronic commerce,” said competition commissioner Mario Monti.

Microsoft Corp. denies the allegations and notes that it has an uphill battle to fight in the server arena. On the basis of the allegations, the Commission asked Microsoft a series of questions about Windows 2000 that the company must answer within four weeks, Monti said.

Depending on these answers, the Commission will then decide whether the allegations are justified and then whether to launch a formal investigation to determine whether Microsoft has abused its dominant position in the PC operating system market.

The inquiry will not interfere with Microsoft’s launch plans for Windows 2000, the commissioner explained. However, if a formal investigation eventually determines that Microsoft has infringed EU antitrust rules, it will have to modify the operating system to bring it into compliance or risk daily fines.

This investigation is the latest in a series of cases that the Commission has had with Microsoft. In 1998, for example, the Commission closed a case involving Microsoft’s licensing agreements with Internet service providers, following amendments to the deals.

In response to questions, the commissioner stressed that it is important to differentiate between the substance of the current U.S. government’s antitrust trial against Microsoft and the current status of the EU case, which he described as representing only “our first step in verifying the allegations.”

According to these allegations, Microsoft has bundled its PC operating system together with other software so that only Microsoft products are fully interoperable with each other, the commissioner explained. The bundling means that the company can spread its dominance over PC operating systems to server operating systems software, he said.

“And we understand that whoever gains control over server operating systems is likely to control electronic commerce too,” he explained.

“There is probably a misunderstanding of how intently we in the industry focus on interoperability,” said John Frank, director of law and corporate affairs at Microsoft Europe. Frank explained that in the server segment of the market, it is Microsoft that is trying to compete with established players such as Sun Microsystems Inc. and others.

In a statement, Microsoft stressed that it will cooperate fully with the Commission’s request for information, and that the investigation in no way will interfere with the commercial availability of Windows 2000. The statement pointed out that the Commission typically requests information from the company three or four times a year.

“In this case as in others, the Commission will ultimately conclude that Microsoft’s work conforms fully with the European Union competition law,” the statement said.