Update: Microsoft, EU reach accord on antitrust

Deal would resolve decadelong dispute

Microsoft appears to have reached an agreement with the European Commission that concludes an antitrust battle that has lasted a decade, Europe's top competition regulator said today.

A proposal the company offered in July to address charges of monopoly abuse were dismissed as insufficient by the commission as well as by rivals in the software industry. But the latest iteration appears to have mollified the EC's regulator.

"We believe this is an answer," said competition commissioner Neelie Kroes in a press conference.

"I think this is a trustful deal we are making. There can't be a misunderstanding because it is the final result of a long discussion between Steve Ballmer and me," she added.

The case has occupied Kroes during her entire five-year tenure as Europe's top antitrust cop, a position she is scheduled to step down from in about a month. People close to the commissioner have said she is keen to conclude the case, but she has always stressed that she would not force a settlement if it was not the right one.

The new offer addresses charges that Microsoft distorted competition in its favor in the market for Web browsers by giving its Internet Explorer (IE) browser an unfair advantage over rivals.

It also addresses accusations that Microsoft hides important interoperability information from rivals that prevents them from competing fairly against Microsoft Office, as well as other software products, the commission said.

To address the browser case the software maker has offered to create a new ballot screen inside its Windows operating system that lists a maximum of 12 browsers and gives them all exactly the same visibility and ease of use as IE.

The earlier offer was criticized for still granting IE a slight advantage over other browsers on the ballot screen.

Meanwhile, Microsoft has made renewed assurances that it will provide rivals, including open source software vendors, ready access to the interoperability information they need to make products that work properly with Windows, the operating system running over 95% of the world's personal computers.

On Friday, the commission will distribute the new offer from Microsoft to interested third parties in the case, including rival software manufacturers and consumer groups. They will have one month to comment.

Kroes said she is sure some of Microsoft's rivals will not be satisfied by the new offer. "A number of people are never 100 percent satisfied," she said.

She said she would take reasonable criticism of the offer seriously but added that Microsoft's offer would restore effective competition. "At the end of the day that's what we are looking for," she said.

In a press conference today, Microsoft counsel Brad Smith acknowledged that the proposed settlement helps the company as it looks to address other issues, such as gaining regulatory approval for its search deal with Yahoo.

"Until now, questions of competition law in relation to IT have all been about Microsoft, but now that period is drawing to an end. We can now look ahead at the competition issues in search and paid search advertising," he said.

Smith also wants to turn his attention to Oracle's acquisition of Sun Microsystems, to which Microsoft objects. "Today there's a different industry, a different agenda, and closure like this of the antitrust dispute lets us think about the broader issues," he said.

One outstanding legal issue that Microsoft has with the commission concerns the fines imposed on it for failing to abide by a 2004 antitrust ruling. Today's rapprochement does not address that. Microsoft has appealed to the Court of First Instance in Luxembourg and is awaiting a date for a hearing. Representatives declined to comment on the matter.

The European Committee for Interoperable Systems (ECIS), a trade group representing IBM, Oracle and other Microsoft rivals, gave a cautious welcome to the new settlement offer, which it can't examine until Friday but will look at closely during the monthlong comment period.

"ECIS notes that the settlement does not appear to deal with the inadequacy of Microsoft's standards compliance, unfair pricing practices, or other concerns related to patent abuse or standards manipulation," ECIS Legal Counsel Thomas Vinje said in a statement.

He also questioned whether Microsoft's offer to resolve interoperability issues went far enough. "Microsoft's interoperability commitment takes the shape of a public undertaking relying on private enforcement. Our experience over the last decade has shown that scrutiny by public authorities is critical to ensure Microsoft's effective compliance and must accompany private enforcement mechanisms," Vinje said.

ECIS said it's vital that a settlement includes "vigorous enforcement mechanisms" such as regular monitoring to make sure that Microsoft lives up to its part of the deal.

Copyright © 2009 IDG Communications, Inc.

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