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Microsoft, EU interoperability fight intensifies

Windows developers 'misled' journalists

No one used the 'L' word, but both sides in the Microsoft antitrust battle in Europe accused each other of lying about basic facts surrounding the latest twist in the long-running saga that emerged yesterday.

The European Commission yesterday sent Microsoft a statement of objections accusing the software vendor of failing to provide interoperability information on "reasonable and non-discriminatory terms". This was a requirement laid out in the landmark 2004 antitrust ruling against the company.

In its statement, the Commission said the software giant proposes overcharging for vital interoperability information needed by software makers to allow their products to work properly with the Windows OS.

It dismissed almost all of the information Microsoft proposed revealing as not innovative and therefore not worth the price the company wants to charge to license it.

Competition commissioner Neelie Kroes said Microsoft had agreed that the innovativeness of the information should be the main criterion when setting the price - but in a conference call with journalists yesterday, Microsoft top lawyer Brad Smith denied his company had agreed innovativeness should be the main criterion.

"We told the Commission we believe innovation is one of three main elements. We don't have the same interpretation of what had been established," he said.

Then ECIS (European Committee for Interoperable Systems) accused Microsoft of misleading journalists by citing a study by accountants, PWC (Price Waterhouse Coopers), which shows that the prices Microsoft wants to charge for licenses to the interoperability information are 30 percent below normal market rates.

"It is an outrageous comparison," said Thomas Vinje, ECIS's legal advisor and a partner in the Brussels office of law firm Clifford Chance. "The PWC study compares the prices Microsoft wants to charge with the market price for much more valuable information such as software code, documentation, and full redistribution rights," he said.

"What people will get with Microsoft's interoperability information is a lot less valuable. To compare it with the sort of information in the PWC study is like comparing apples with... some withered fruit," he added.

The actual prices Microsoft wants to charge for licensing out the interoperability information are too complicated to share with journalists, Microsoft spokesman Tom Brookes said. He warned inquisitive journalists that there is no simple price list.

The Commission believes that if all software vendors bought licenses it would amount to around 35 percent of the net profit of the industry. Smith dismissed this, and said "I don't think you can conclude that."

He said that if all vendors bought the licenses the total revenue Microsoft would earn would total around $30m - a tiny fraction of annual software industry profits.

"That $30m figure bears no resemblance to reality, and if Microsoft can't explain how they reached this figure it has absolutely no value," Vinje said.

Microsoft has four weeks to respond to the latest statement of objections, after which it faces daily fines of up to €3m. In the meantime, the Commission is expected to conclude its assessment of the substance of the interoperability information Microsoft submitted.

It doesn't have to be innovative. In fact Microsoft's rivals, including ECIS, argue that much of the information competitors need in order to build their software so that it interoperates with the ubiquitous Windows OS on PCs is quite straightforward. Nevertheless, if it isn't revealed then rivals are stuck, Vinje said.

Commission spokesman Jonathan Todd told journalists Thursday that Microsoft's continued failure to comply with the antitrust ruling is unprecedented.

"In the 50 years of European antitrust policy, it's the first time we've been confronted with a company that has failed to comply with an antitrust decision," he said. "You have to look at their attitude faced with other antitrust authorities in other jurisdictions. This is a company that apparently does not like to have to conform with antitrust decisions," Todd added.


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