Japan’s fair trade watchdog raids Microsoft

Eight officials from Japan’s Fair Trade Commission (FTC) entered the Japanese offices of Microsoft Corp. Thursday morning as part of an investigation into possible anticompetitive practices by the U.S. software giant, the company confirmed.

“The FTC officials are conducting an investigation regarding provisions in Microsoft licenses with PC manufacturers,” said Aki Araki, a Microsoft Japan spokeswoman. “We are confident that our practices are consistent with Japanese law.”

A team from Microsoft is continuing to help the FTC officials with their investigations, Araki said.

Microsoft has allegedly forced Japanese PC makers to accept a contractual clause stipulating that they can’t bring a case to court even if the software giant’s technologies are very similar to those developed by Japanese firms, the Kyodo news agency reported Thursday, citing sources close to the action.

Microsoft licenses its patented software — most crucially the Windows operating system — to PC manufacturers. Previous probes in the U.S. and Europe have focused on whether Microsoft illegally maintains its monopoly in PC operating systems through restrictive licensing agreements with PC makers.

In October 2003, the European Union (E.U.) contacted some hardware manufacturers about Microsoft’s licensing policy as part of a preliminary investigation, it said. The E.U. suspected that “nonassert obligations” in the company’s licensing conditions constitute anticompetitive practice, it said.

The E.U. said on Thursday that the FTC had not contacted it about the raid.

Microsoft spokesman Tom Brooks said on Thursday that the company has already decided to remove the offending provision from its original equipment manufacturer (OEM) contracts, as some customers have raised concerns. Microsoft previously showed the European Commission and the U.S. Federal Trade Commission the contracts and both organizations found them within the rules, he said.

“Microsoft will continue to co-operate with the Japanese Fair Trade Commission as it proceeds with the enquiry,” he said.

Japanese media sources quoted unnamed officials as saying that the current investigation focuses on the licensing for Windows XP. In 1998, Microsoft was warned by the FTC to stop anticompetitive business practices, but the company escaped punishment.

Japan is the world’s third-largest market for PCs after the U.S. and China.

Antitrust concerns appear to be coming to a head for Microsoft. In a separate case, the Commission is slated to discuss a draft negative antitrust ruling against Microsoft with national regulators from the E.U. on Mar. 15, according to a source familiar with the case. The Commission, which is the E.U.’s executive body, believes Microsoft is guilty of abusing the dominant position of its Windows operating system.

(Gillian Law in London and Paul Meller in Brussels contributed to this report.)

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