EU Extends Microsoft’s Compliance Deadline; US Issues Warning

Microsoft received both good and bad news on the antitrust front. The European Commission (EC) has granted the software maker extra time to meet specific requirements before facing stiff daily fines. On the other hand, the Department of Justice (DOJ) said the company appeared to be falling behind on compliance with the terms of its U.S. antitrust settlement.

In Europe, commissioners agreed to give Microsoft extra time to answer criticisms that it has not opened up its Windows source code to other software makers as established in the penalties the EC handed down after it found Microsoft had behaved in an anti-competitive way.

The EC extended the date for a US$2.4-million-per-day fine to kick in to Feb. 15, in order to give staffers time to review information submitted by Microsoft, which has claimed that it is complying with the code-sharing requirement. Previously, an independent monitor that was assigned to review the case said Microsoft’s licensing program for the code was unwieldy and was discouraging competitors from taking part.

The source-code sharing program is the last requirement from the March 2004 ruling that Microsoft must fulfill. The company has already paid the largest fine in EC history and has released a version of Windows in Europe that does not have the built-in Media Player software.

That the requirement to open Windows code to competitors would become a stumbling block is not a surprise, given Microsoft’s long history of carefully guarding the code that underlies its operating system. Only recently has it been willing to share source code with customers and partners in certain circumstances, such as to answer concerns about the software’s security.

Marked Tardy

In the U.S., meanwhile, the Department of Justice said Microsoft is not moving fast enough to provide documentation needed to evaluate whether the company is complying with its 2001 antitrust settlement.

Microsoft has “fallen significantly behind in responding to technical documentation issues” submitted by a technical committee that is monitoring the company’s compliance, the DOJ said in a court filing. The company should “dramatically increase the resources devoted to responding to technical documentation issues,” the agency warned.

Microsoft filed a response that blamed the shortcomings on “substantial difficulties” it has confronted in hiring enough qualified employees to produce the necessary documentation. It intends to hire a China-based vendor to help with the process, the company said, but noted that limitations on workspace at its Chinese facilities were hampering those efforts.

The DOJ has the power to issue stiff fines and other penalties against Microsoft if the company does not comply with the specific terms of the settlement, which was struck after Microsoft was found guilty of using its dominance of the operating system market to squelch competition in the browser marketplace.

At one point, the government threatened to force Microsoft to split into multiple companies, which it avoided with the settlement, part of which was aimed at making it easier for others to make products that work effectively with Windows.

Still Lingering

By now, Microsoft had hoped to be out of the antitrust quagmire and able to focus squarely on its next-generation operating system, Windows Vista, which is due this year. Response to the new release will help determine how much the competitive landscape in the PC software niche is likely to change.

Microsoft has spent billions settling private suits with other companies, but the European and U.S. governments have proven more intractable. Recently, South Korean regulators began to move toward sanctioning Microsoft, but the software maker was able to strike a deal to keep that case from becoming another potential thorn.

“Microsoft has shown it will dip into its huge cash reserves to settle the private cases that it can,” Yankee Group analyst Laura DiDio told the E-Commerce Times, referring to settlements with AOL, Sun and IBM, among others. “Regulators have asked for Microsoft to let down its guard on what it considers its most valuable asset — intellectual property.”

Microsoft still needs to avoid distraction heading into the Vista launch. The company is now facing the most competitive pressure in its history, with open-source software, a rejuvenated Apple and Google’s growing Web-services empire posing threats to the software giant over the long term, noted Enderle Group Principal Analyst Rob Enderle.

“This is new territory for Microsoft in terms of competition,” he said. “The stakes are as high as they’ve ever been for them to execute well.”

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