China's Antitrust Regulators Press Microsoft for Answers

After two raids on Microsoft's offices in China, the country's government gives the software giant 20 days to provide answers about its use of software verification codes.


Microsoft is facing renewed pressure from China's antitrust agency this week.

Regulators at the country's State Administration for Industry and Commerce (SAIC) once again issued a statement on the department's Website calling for Microsoft to cooperate with the government's investigation into allegations of anti-competitive practices related to the company's use of verification codes on its software, particularly the Windows operating system (OS) and Office productivity suite. Microsoft now has 20 days from Sept. 1 to explain its business dealings in China.

"We're serious about complying with China's laws and committed to addressing SAIC's questions and concerns," a Microsoft spokesperson told eWEEK.

Since July, the company has drawn scrutiny from China's government following complaints first levied against Microsoft in June 2013. The SAIC announced that it had conducted raids on Microsoft's offices in Beijing, Shanghai, Guangzhou and Chengdu on July 28. Investigators parted with documents, contracts, files, emails and computers.

A week later on Aug. 6, and two days after the SAIC urged Microsoft to "strictly abide by Chinese laws," the agency initiated a second round of raids, this time targeting the company's Beijing, Liaoning, Fujian and Hubei. The Dalian-based offices of Accenture, to which Microsoft outsources its financial operations in the region, were also paid a visit by investigators.

Now, the SAIC is calling on Microsoft to provide the answers it is looking for.

After interviewing Microsoft Vice President Chen Shi (David Chen), the agency said on Sept. 1 that the company has 20 days to provide a written explanation about its reliance on activation codes, according to a Sept. 1 report in Reuters. Microsoft, like many software makers, combats privacy and fraud by often requiring buyers to submit unique authentication codes to verify that their software licenses are legitimate.

Microsoft has been stung hard by software piracy in China, despite the size of that market. "Former Chief Executive Steve Ballmer told employees in Beijing that the company made less revenue in China than it did in the Netherlands," stated the report.

China's government has also been a source of consternation for American tech companies.

After ending support for Windows XP and lingering apprehension following disclosures about the U.S. National Security Agency's spying capabilities, China banned the use of Windows 8 on government computers. In May, the Chinese government pressed the nation's banks to replace their IBM servers for those from local IT vendors.

Meanwhile, the country is also looking to develop a homegrown OS to take on OSes from Microsoft and other U.S.-based IT giants.

Last month, the Chinese Academy of Engineering's Ni Guangnan, head of a government-backed OS development alliance, said his group was readying a desktop OS rival to Windows for release in October. A mobile version to compete with Google's Android and Apple's iOS is expected to follow at a later date.

Ni believes the ambitious undertaking will reshape the OS landscape in China by replacing all desktop OSes within two years and all mobile OSes in three to five years.

Pedro Hernandez

Pedro Hernandez

Pedro Hernandez is a contributor to eWEEK and the IT Business Edge Network, the network for technology professionals. Previously, he served as a managing editor for the network of...