September 30, 2006

“Software giant Microsoft must pay a fine of 497 million euros ($613m) for abusing its dominant market position,” ordered the European Commission earlier this year.

Competition Commissioner Mario Monti also insisted that Microsoft reveal secrets of its Windows software, which sits on 90 per cent of the world’s PCs. Microsoft has a cash pile of more than $50 billion, so even a fine on this scale — a record for the European Union against a single firm in an antitrust case — is unlikely to hurt it financially. In fact, the company’s shares climbed 0.6 per cent to $24.29 in New York during early trading.

Industry experts say the non-financial penalties are likely to hurt Microsoft more by opening it to further challenges and altering the regulatory environment it operates in.

Manager of the Microsoft Liaison Office in Pakistan, Taimur Mughal, recently spoke to Sci-tech World about the episode. “We currently appealed (against) the two decisions that have been taken by the European Commission. At the same time, we have fully complied with those decisions and have worked hard to make sure that we provide a version of Windows without a media player (Windows XPN) and the technical documentation that would reveal communications protocols to competitors.”

He claimed that the commission’s actions were inconsistent with its public statements regarding its commitment to an open and fair process. First, it delayed the matter for more than nine months before raising issues about Microsoft’s technical documentation and then declared that those documents could not be used. They even didn’t bother to mention details so that Microsoft could improve its technical documentation process, added Mr Mughal.

“Later, the commission filed a Statement of Objections without reviewing a substantial volume of information that we provided on their request. Afterwards, the commission strictly refused to disclose communications with Microsoft’s competitors as well as with the independent technical advisor responsible for analysing our compliance efforts,” he explained.

“The commission has declined our appeal for an open hearing to rebut the allegation in its Statement of Objections. We think that those decisions are unjustified. We will comply with those decisions, though,” remarked Mr Mughal.

Microsoft has captured the software market. Do other companies lack talent and skills or is their any other reason behind this domination of the market? “Microsoft products and services are popular around the world. The single biggest reason behind this popularity is Microsoft’s investment in research and development. Today, our commitment to innovation is reflected in our ongoing commitment to R&D. Last year, we spent over $6 billion on R&D to keep driving innovation forward,” claimed Mr Mughal.

“It is also important to understand Microsoft’s approach to any market. We visit many local IT companies around the world and work with them to polish their skills so that they can provide innovative solutions to their customers on the Microsoft platform,” he said. According to Mr Mughal, the partnership between Microsoft and the local IT companies in different countries is important for their success.

Every company should be given an equal chance to get room in the software market. As the most outstanding software firm, what steps should be taken by Microsoft to achieve this goal?

“As I have already explained, one of the many reasons for our success is the network of local, multinational and global partners we work with. Research has shown that for each $1 that Microsoft makes our partners make between $4 and $8. This practice has created many opportunities of economic growth for the local IT companies around the globe,” remarked Mr Mughal.

The trick adopted by Microsoft to dominate the market is: “Buy one, get one free”. You provide two or more software applications at the cost of one. If you stop this practice, will it affect your position in the market?

“Technology innovation and the integration of new features into products is a common practice in many industries, including the IT industry. All major operating system vendors constantly add new innovations to their products,” he said.

“Similarly, customers tell us which features and products they like and use. Since many work together, it’s logical for us to find a way to serve our customers in a way that makes their computing experience easier and more beneficial.” Obviously, the issue has been the subject of extensive legal debate over the past decade, and the European Commission case is still continuing.

“We believe in providing our customers the best products and services and that can be achieved through continual improvement of the operating system and the incorporation of new features and functionality. But it also includes strict rules about how Microsoft must ensure that other providers of this functionality also have the clear ability to present their offerings to consumers. Microsoft is committed to full compliance with these rules, and all of our other legal and corporate obligations.”

Regarding the importance of healthy competition for better growth of the IT industry, Mr Mughal said: “From our perspective, we continue to face significant competition from open source software and other competitors, and we clearly have to keep innovating in order to succeed — not the typical description of a monopoly.

“However, two US courts have concluded that Microsoft is a monopoly and we accept those rulings. Our main objective is to fulfil the needs of our customers and to drive innovation through continued investment in research and development,” he added.Leaving aside issues in what we commonly call “monopoly”, the services provided by Microsoft as an established software firm are no doubt beneficial for many customers. However, it needs to be very careful in the future while dealing with other companies to avoid being accused of anti-competitive behaviour.

The writer is a freelance contributor

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