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US Justice Department criticises EU's Microsoft ruling

Penalties may stifle innovation instead of promoting fair competition, DoJ says

The European Commission's order for Microsoft to ship a version of Windows without the Windows Media Player could stifle innovation and help Microsoft's rivals instead of promoting fair competition, the US Department of Justice's antitrust chief says.

Assistant Attorney General Hewitt Pate also says the record $613 million fine levied on Microsoft by the European Commission is "unfortunate". It surpasses fines the Commission has imposed on price-fixing cartels and that may send the wrong message about antitrust enforcement priorities, Pate says.

The US government fought its own antitrust battle with Microsoft, a case that was filed in 1998 and settled in 2002. Although the government proposed a breakup of Microsoft, it never proposed that Microsoft remove any part of Windows and for a reason, Pate says.

"Imposing antitrust liability on the basis of product enhancements and imposing 'code removal' remedies may produce unintended consequences," Pate says. "Sound antitrust policy must avoid chilling innovation and competition even by 'dominant' companies. A contrary approach risks protecting competitors, not competition, in ways that may ultimately harm innovation and the consumers that benefit from it."

The US settlement with Microsoft provides "clear and effective protection" for competition and consumers by preventing misconduct by Microsoft that would inhibit competition in the area of middleware applications such as the Web browsers and the media player, Pate says.

"The US experience tells us that the best antitrust remedies eliminate impediments to the healthy functioning of competitive markets without hindering successful competitors or imposing burdens on third parties, which may result from the EC's remedy," he says.

The US continues to be active in its enforcement of Microsoft's compliance with the settlement and this work has resulted in substantial changes to Microsoft's business practices, according to Pate.

The EC's decision to require Microsoft to share details of the technologies used by its server products to communicate with Windows clients is similar to the US approach to curtail Microsoft's anticompetitive behavior, Pate notes.

"Like the U.S. decree, the EC decision appears to focus on providing competing software developers with the opportunity to build products that communicate and interoperate with Windows-based PCs. The details of the EC's requirements on this point remain to be seen," he says.

Despite the criticism, or "divergence" as Pate calls it, the US and the European Union have a good relationship on competition matters, he says.

The European Commission ruled that Microsoft is an abusive monopolist. The decision came Wednesday, at the close of a five-year investigation into Microsoft's business practices in Europe. The Commission fined Microsoft and ordered the company to offer a version of Windows without the Windows Media Player software within 90 days and disclose within 120 days the details of the software interfaces used by its products to communicate with Windows.

Microsoft will challenge the ruling, a process that could keep the battle rumbling until 2009, it says.


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