Wednesday, January 21, 2009

EC Investigates Microsoft's Browser Tie, May Initiate Inquiry into IBM’s Market Conduct

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

"Microsoft's tying of Internet Explorer to the Windows operating system harms competition between web browsers, undermines product innovation and ultimately reduces consumer choice," the European Commission (EC) announced on January 17.

Abuse of Dominant Position

Just two days earlier, the EC sent a Statement of Objections (SO) to the computer software company, outlining the EC's preliminary view that Microsoft's tying of its web browser Internet Explorer to its dominant client PC operating system Windows infringed the EC Treaty rules on abuse of a dominant position.

Internet Explorer has an artificial distribution advantage that other web browsers are unable to match, according to the EC. Its availability on 90 percent of the world's PCs purportedly distorts competition on the merits between competing web browsers.

The EC expressed concern that "the ubiquity of Internet Explorer creates artificial incentives for content providers and software developers to design websites or software primarily for Internet Explorer which ultimately risks undermining competition and innovation in the provision of services to consumers."

A Statement of Objections is a formal step in EC antitrust investigations in which the Commission informs a party in writing of the objections raised against it. The party may reply in writing, setting out facts in defense of the objections, and request an oral hearing. The sending of an SO “does not prejudge the final outcome” of the investigation, according to the EC. An EC press release on this investigation appears here.

Microsoft’s Response

On January 16, Microsoft issued a statement in response to the SO, saying that it was committed to conducting its business in full compliance with European law. Microsoft has about two months to respond in writing to the SO. It can also request a hearing, which would take place after the submission of this response.

According to Microsoft, the SO states that the remedies put in place by the U.S. courts in 2002 following antitrust proceedings in Washington, D.C. do not make the inclusion of Internet Explorer in Windows lawful under European Union law.

Allegations Against IBM

Another U.S. technology giant, IBM, might face an EC inquiry into its conduct in the computer mainframe market. T3 Technologies—a privately-held, Florida-based firm that calls itself “the other mainframe company”—announced on January 20 that it had filed a formal complaint against IBM with the EC Directorate General for Competition.

According to the announcement, T3 asserts that IBM abused its monopoly power in the mainframe industry by tying the sale of its operating system to its mainframe hardware and by withholding patent licenses and certain intellectual property to the detriment of mainframe customers. The company claims that IBM has prevented the industry from having a choice in the mainframe market.

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