EU: Microsoft 'shields' IE from competition

The European Union’s antitrust agency on Saturday confirmed that it has charged Microsoft with breaking the law, saying that the company “shields” Internet Explorer (IE) from “head-to-head competition” by bundling its browser with Windows.

The CEO of Opera Software, the Norwegian browser maker whose December 2007 complaint sparked the EU’s investigation, welcomed the move. “This is extremely important,” Jon von Tetzchner said in an interview late Friday. “It’s important that people have a choice of browsers. It’s important that we don’t have one company dominating the browser market.”

In a statement issued Saturday by EU spokesman Jonathan Todd, the Competition Commission acknowledged that it delivered a Statement of Objections to Microsoft last Thursday, a day before Microsoft announced that it faced new antitrust charges.

Although the EU has not released the text of those charges, it provided some clues as to their direction. “The evidence gathered during the investigation leads the Commission to believe that the tying of Internet Explorer with Windows, which makes Internet Explorer available on 90% of the world’s PCs, distorts competition on the merits between competing Web browsers insofar as it provides Internet Explorer with an artificial distribution advantage which other Web browsers are unable to match,” the EU said.

The Commission also claimed that Microsoft’s practice of bundling IE, something it’s done since 1995, “shields” the browser from “head-to-head competition with other browsers,” adding that it believes the lack of competition was “detrimental to the pace of product innovation.”

Not surprisingly, von Tetzchner agreed. “Microsoft wouldn’t have the market share they have without the tying of IE with Windows,” he said.

According to Net Applications, a U.S. Web metrics company, IE accounted for 68.2 percent of the browser market in December 2008, down nearly 8 percentage points for the year. However, Microsoft’s browser is less popular in Europe, according to French measurement vendor Applied Technologies Internet. In November, the last month that data was available, Applied Technologies’ XiTi monitoring site pegged IE with 59.5 percent of the European browser market .

Firefox, developed by California-based Mozilla, is the second-most popular browser in both metrics firms’ rankings. By Net Applications’ numbers, Firefox had a 21.3 percent market share in December, while XiTi’s put Firefox’s European share at 28 percent for the same month. Opera has a very small slice of the overall browser business: 0.7 percent, according to Net Applications and 3.3 percent by XiTi’s estimate.

The EU’s antitrust agency cited the September 2007 ruling by the government’s second-highest court as precedent. That decision rejected Microsoft’s appeal of the original 2004 verdict, and reaffirmed the illegality of Microsoft’s practice of typing Windows Media Player to Windows. That should come as no shock. After the 2007, ruling, antitrust experts expected that it would embolden the Commission and its chief, Neelie Kroes. “The decision … is a clear signal to the European Commission that it has the leeway to go ahead,” said Herbert Hovenkamp, a professor at the University of Iowa College of Law and a noted antitrust scholar, at the time. “[The commission] now has a license to go ahead, and they have a pretty aggressive posture.”

The EU did not specify what it may demand of Microsoft, but left the door open to a solution similar to the 2004 case, when it required the company to offer a version of Windows without the media player. “The Commission may impose a fine on Microsoft, require Microsoft to cease the abuse and impose a remedy that would restore genuine consumer choice and enable competition on its merits,” the agency said.

Opera’s von Tetzchner had some ideas of his own how the EU could handle IE. “One way would be to include multiple browsers with Windows, and let people choose,” he said. “Or Microsoft could provide an icon [on the Windows desktop] for connecting to the Internet, and it would then ask you which browser you want to use.”

In any case Microsoft should be forced to separate IE from Windows. “I would like Microsoft to remove their browser from Windows,” von Tetzchner said.

Asa Dotzler, Mozilla’s director of community development, didn’t have a remedy in mind, but agreed with Opera’s CEO that there’s a problem. “In a functioning market, vendors producing superior products would take share from vendors producing inferior products,” Dotzler said in a Saturday blog posting. “Today, that’s simply not possible because the cost of the most effective channel for distribution, shipping as the default browser with new computers, for everyone except the OS vendor, is prohibitively high,” he argued.

In its original complaint, Opera also accused Microsoft of stymieing the development of Web standards by forcing site designers to adhere to IE’s own implementation of certain protocols. “Microsoft’s unilateral control over standards in some markets creates a de facto standard that is more costly to support, harder to maintain and technologically inferior, and that can even expose users to security risks,” Opera charged in late 2007.

Without having had a chance to read the EU’s new charges, von Tetzchner said he didn’t know if the Commission had also integrated Opera’s Web standards complaint in the accusations. The Commission, however, hinted that it had. “In addition, the Commission is concerned that the ubiquity of Internet Explorer creates artificial incentives for content providers and software developers to design websites or software primarily for Internet Explorer which ultimately risks undermining competition and innovation in the provision of services to consumers,” the EU said.

Other antitrust regulars have cited IE’s dominance as well. In October 2007, for instance, a group of U.S. state attorneys general urged a federal judge to hold Microsoft to a 2002 antitrust settlement another five years, in part over concerns over IE. A year ago, U.S. District Court Judge Colleen Kollar-Kotelly extended her monitoring of Microsoft to November of this year.

Microsoft has eight weeks to respond to the Commission’s charges, and can request a hearing to defend itself, which it has done several times in its history with the EU.

On Friday, Microsoft’s only comment was that it is “committed to conducting our business in full compliance with European law,” and that it is studying the charges before deciding whether and how it would reply.

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