EU shows antitrust toughness with Microsoft case

August 3, 2009

European Commissioner for Competition Neelie Kroes

By Foo Yun Chee
BRUSSELS, Aug 3 (Reuters) – Microsoft’s offer to settle a decade-long battle with EU antitrust regulators cements the European Commission’s reputation as one of the world’s toughest watchdogs and could force other firms to follow its example.

The U.S. software giant last month yielded to the Commission’s demand to let users choose their own browser and to provide more information that would let third parties design programmes compatible with its products.

Analysts said that the case underlined the difference in approach of regulators in Europe and the United States.

“In the last 10 years compared with the United States, Europe has been effectively prosecuting antitrust cases. The U.S. has been taking a cautious approach,” said competition expert Robert Stillman at consultancy CRA International.

“The Microsoft interoperability case is an example where the Commission got it right. In the United States, there is no interest in that case,” he said.

The EU executive has slapped fines totalling 1.68 billion euros ($2.37 billion) on Microsoft over the years for infringing EU antitrust rules, may levy another hefty penalty if it were to rule against the company in the current case.

U.S. regulators have generally taken a slightly softer line than their European counterparts.

The newly appointed head of the U.S. Justice Department’s antitrust department, Christine Varney, said in May the unit had “not been as active as it could have been” under former President George W. Bush and vowed tougher enforcement.

Part of the European Commission’s firm stance has to do with its sweeping mandate, said antitrust lawyer Jonas Koponen at law firm Linklaters.

“The Commission is tough in different fields, in state aid, cartels, antitrust. Not many regulators have that broad a regulation portfolio,” he said.

With the Commission having shown its willingness to dig in for a long battle, companies on the regulator’s radar screen should take heed of Microsoft’s decision to settle, said antitrust lawyer Stephen Kinsella at Sidley Austin.

“If it is possible to resolve a case with both parties agreeing … and then give some forward-looking commitments designed to resolve problems for the future as well, that has to be the way to try to deal with issues in this area,” he said.

“If Microsoft can settle with the Commission, presumably others can,” Kinsella said.

U.S. wireless chip and technology company Qualcomm, under scrutiny in Brussels for anti-competitive behaviour, is a case in point.

“If people look at the willingness of the Commission to close cases through commitments, that certainly remains am option for Qualcomm if it feels it is likely to end up with a decision against it,” Adam Collinson at law firm Eversheds said.

“Certainly in terms of the time and cost of pursuing these investigations, if there isn’t a huge commercial impact to offering these commitments, then that may be a very sensible thing to do,” he said.

Companies with interoperability issues and facing regulatory scrutiny would likely look at Microsoft’s concessions to get an idea of the Commission’s concerns, said Linklaters’ Koponen.

“There are issues in there that could be relevant for other cases, for example Oracle and Sun Microsystems. IBM could be an issue,” he said.

World No. 3 software maker Oracle sought Brussels’ approval on Monday on its plan to buy computer maker Sun, the world’s fourth-largest maker of server computers and also the developer of Java and Solaris software.

U.S. computer firm T3 Technologies filed a complaint with the Commission in January, accusing IBM of abusing its power in the mainframe computer industry.

The benefits to companies looking to settle are significant. Not only do they escape fines from the Commission but the possibility of court actions by competitors.

But companies could face an uphill battle if the Commission wants to set a precedent in complex and groundbreaking cases.

“Sometimes, they really want a decision, even a judgement, because they want to establish a principle without a doubt,” said Kinsella.

Since her appointment in 2004, Neelie Kroes, Europe’s competition czar, has taken on political leaders looking to prop up their countries’ ailing car industries and banks as well as conglomerates seeking to block rivals or run cartels.

Far from weakening regulatory oversight as some expected, the credit crisis and economic downturn have boosted antitrust authorities’ resolve to uphold the rules.

“Competition authorities both in Europe and the United Kingdom have maintained a pretty hard face even in the difficult economic and financial climate,” said Eversheds’ Collinson.

“They do not want companies to be able to use the economic and financial crisis as an excuse to engage in anti-competitive practices which in the long term will be damaging to the economy and to consumers.”

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