Microsoft Loses Antitrust Ruling in South Korea (Update6)
Dec. 7 (Bloomberg) -- Microsoft Corp., the world's largest software maker, was punished for breaching antitrust rules by South Korea, which followed the European Union in ordering the company to sell multiple versions of its Windows operating system.
Microsoft will have to offer consumers the choice of buying Windows without its media player and instant-messaging software and pay a 33 billion won ($32 million) fine, the Korea Fair Trade Commission said in a statement today. Microsoft will appeal, company lawyer Tom Burt said in an e-mail.
``It could increase the hassle factor in all the other small markets around the world,'' said Brendon Carr, a lawyer at Aurora Law Offices in Seoul, who advises global companies on antitrust rules. The case may encourage similar actions, he said.
The verdict mirrors a March 2004 ruling by European regulators that fined the Redmond, Washington-based company 497 million euros ($584 million) and ordered a similar stripped-down Windows. Microsoft Chairman Bill Gates started including the software with Windows to help make computers part of home-entertainment systems for playing movies and keeping in touch with friends.
``Consumers should wish the kind of competition they have in software existed in other areas,'' Gates said during a press conference in New Delhi today. ``We offer different versions of our software.'' Gates said he didn't know the specifics of the ruling.
Sales in Asia, Europe and other regions outside the U.S. accounted for almost a third of Microsoft's $40 billion in revenue last fiscal year. Korea accounts for less than 1 percent of Microsoft's sales.
Stripped Down
In October, Microsoft threatened to pull Windows out of Korea if regulators forced the company to remove code or redesign the operating system because it would create glitches in the overall program and increase programming costs.
``It could pave the way for other governments to build similar cases against Microsoft,'' said Matt Rosoff, an analyst at Kirkland, Washington-based researcher Directions on Microsoft. The cost of developing multiple versions of Windows may be billions of dollars and ``gravely increase the cost of building their main product and hamper their ability to develop software.''
``We are disappointed with the Commission's decision and strongly believe that their case is without basis in law or in fact,'' Burt, Microsoft deputy general counsel, said in the e- mail. ``We will be appealing this decision and are confident that we will ultimately prevail.''
Won't Withdraw
Microsoft probably won't withdraw Windows out of the country because the measures announced today are different from an earlier proposal to force the company to only offer a stripped- down version of the operating system, Burt said.
Korean Regulators said Microsoft's inclusion of its Media Player and MSN Messenger programs with Windows hurt consumers and ordered the company to sell a version of the operating system stripped of the programs, which let computer users watch videos, listen to music and send real-time messages.
The other version will have the programs and contain links to Web sites allowing consumers to download competing products, the regulator said. It called for the changes within 180 days.
Fair Trade Commission director-general Kim Byung Bae said at a press briefing in Seoul that regulators will consider reviewing the validity of other programs if the ruling is challenged.
Jonathan Zuck, president of the Association for Competitive Technology, a U.S. trade group that's lobbied on behalf of Microsoft in the past, said the Korean ruling threatens to hinder innovation in the industry.
``By dictating how successful companies can innovate their products, this decision will have dangerous consequences for the industry and consumers throughout the world,'' Zuck said in a statement today. ``The future of innovation will be jeopardized if every successful company is strangled by a patchwork of different and often conflicting international regulations.''
Settled Disputes
The sanctions will apply for 10 years after the software maker is officially notified and Microsoft can appeal after five years, the Korean commission said.
Before the ruling, Microsoft had settled its disputes with the two companies, Daum Communications Corp. and RealNetworks Inc., that lodged the complaints with Korean regulators.
Daum, which competes with Microsoft with its own messenger service and lodged its complaint in 2001, in November settled for $30 million. Media player programmer RealNetworks, which filed a grievance last year, dropped its complaints after a $761 million settlement in October.
The EU relied in part on RealNetworks' testimony in its decision to hand Microsoft the record 497 million euros fine. Microsoft is appealing the EU case. In 2001, Microsoft settled its antitrust dispute in the U.S. with the Bush administration.
To contact the reporter on this story:
Young-Sam Cho in Seoul at ycho2@bloomberg.net
Last Updated: December 7, 2005 04:59 EST |
