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Microsoft: New EU attack
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August 30, 2001: 11:55 a.m. ET
Two new complaints allege illegal practices distort competitive market
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LONDON (CNN) - The European Commission Thursday said it has expanded its investigation into Microsoft Corp.'s business practices to see whether it is acting illegally by incorporating digital streaming media technology into its Windows operating systems.
At issue is Microsoft's Media Player software, which allows personal computer users to see and hear video and audio content without lengthy download times.
Microsoft includes the Media Player software, which competes primarily with the RealPlayer from RealNetworks Inc. (RNWK: down $0.36 to $6.60, Research, Estimates), as a standard part of its Windows operating system software.
The European Commission, the competition watchdog of the European Union, said Thursday that by doing so, Microsoft may be violating the law.
"This statement of objections supplements one sent to the company a year ago and adds a new dimension to the Commission's concerns that Microsoft's actions may harm innovation and restrict choice for consumers," the European Commission said in a statement.
The EC said it objects to Microsoft's practice of incorporating the Media Player into its Windows operating system, as this reduces consumer choice. The complaint builds on a similar charge the EU leveled at Microsoft last year regarding earlier Windows versions.
Microsoft on Thursday acknowledged the EC's latest complaint and said it welcomed the agency's move.
"Microsoft has long believed that the merger of these two cases is a prerequisite to a resolution of the company's issues in Brussels and therefore welcomes this merger as a constructive step in the ongoing dialogue on these issues," the Redmond, Wash.-based software maker said in a statement.
Microsoft's plans to incorporate functions such as streaming media and Internet authentication services in its newest operating system, called Windows XP, already has come under attack by government officials, as well as its rivals, in the U.S.
Democratic Sen. Charles Schumer of New York last month asked the Justice Department to include the new product in its antitrust settlement negotiations with Microsoft, and called on the company to delay the release of Windows XP, currently set to hit store shelves on Oct. 25.
The European Commission said Thursday it does not plan to seek a block of the release of Windows XP.
Europe's new assault comes as Microsoft and the U.S Justice Department prepare for a status conference in federal district court Sept. 21 to update the new judge in the case on the status of its four-year-old U.S. antitrust case.
Last Friday, District Court Judge Colleen Kollar-Kotelly was named to hear the Justice Department's antitrust case against Microsoft. It was referred back to the district court level after the Court of Appeals overturned District Court Judge Thomas Penfield Jackson's earlier ruling that Microsoft be broken into two companies as a remedy for anticompetitive practices.
But the appeals court upheld Judge Jackson's finding that Microsoft holds a monopoly in the market for computer operating systems, and that the company had broken U.S. antitrust laws by engaging in anticompetitive business practices.
Separately Thursday, the European Commission alleged that Microsoft (MSFT: down $2.88 to $57.37, Research, Estimates) may be guilty of abusing the dominance of its Windows computer operating system to put makers of competing server software at a disadvantage.
"Server networks lie at the heart of the future of the Web and every effort must be made to prevent their monopolization through illegal practices," EU Competition Commissioner Mario Monti said.
The Commission suspects Microsoft of withholding technical information that rivals would need to make their products compatible with systems that run on Windows.
Additionally, its software licensing policy imposes higher costs on makers of PCs and servers that want to install software from Microsoft's rivals, the Commission maintained, saying this drives customers toward Microsoft server products and restricts choice.
If Microsoft is found guilty of breaking European Union competition rules it can be fined up to 10 percent of revenue.
The Commission's statement of objections does not prejudge the outcome of the EU's antitrust proceedings against Microsoft. The company has about two months to respond to the latest allegations. 
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