Round Two: Europe

Microsoft has won a stay of execution in the U.S., but a European Commission probe into its market practices could have a very different outcome.

Microsoft has won a stay of execution in the U.S., but a European Commission probe into its market practices could have a very different outcome.

The European Commission has two investigations of the company under way, both focusing on allegations that Microsoft is attempting to use its monopoly of the desktop operating system (OS) to gain entry into the server market.

And in Europe, regulators have lower hurdles to meet in finding harm, said Mark Patterson, a law professor at Fordham University. "The burdens on government are somewhat less," Patterson said. And "the chances of success are reasonably good" for the European Union.

In the first case, the commission announced in February 2000 that it was investigating allegations that Microsoft designed its Windows 2000 OS so that it will be fully interoperable only with the companys own server software.

In the second case, announced in August 2000, the commission accused Microsoft of using its dominant position to deny Sun Microsystems and other competitors in the server software market the interface information needed for their servers to work with Microsofts Windows OS. The commission issued a "statement of objections" in this case, a formal step outlining its allegations against the company.

Such a step often leads to an adverse opinion against a company, according to a European source closely following the case.

"European regulators . . . are looking forward to possible negative effects on competition," said James Lucier, vice president and senior analyst at Prudential Securities. "The European case focuses on server-based software . . . That is really the future industry."

The commission has not issued a "statement of objections" in the Windows 2000 case. But sources following the case said it was working to take some action this summer. The commission may decide to merge the cases, or it could opt against issuing a "statement of objections" if it finds no wrongdoing.

That seems unlikely, given a May speech in Berlin by European Competition Commissioner Mario Monti.

"Microsoft appears to have designed one product . . . so that it interoperates better with another Microsoft product in a separate and more competitive market than it does with the products of its competitors. This could be seen as an attempt to leverage its dominant position into related markets," Monti said.

If the commission rules against Microsoft, possible remedies include fines or mandatory changes in business practices.

Microsoft has cooperated with the commissions probe by answering questions and responding to the allegations.

"We think our products are the model of interoperability," said Microsoft spokesman Jim Cullinan. "The perfect proof . . . is the European market, where our customers have had no problems interoperating Windows 2000 and Windows technology with other technologies and other servers."