EU: Microsoft's Vista Could Violate Antitrust Regulations

BRUSSELS, Belgium – The European Union expressed concern for the first time Wednesday that Microsoft's (MSFT) new Vista operating system could break antitrust rules, a day before the company defends itself against EU charges that it has not obeyed an earlier ruling.

EU Competition Commissioner Neelie Kroes wrote to Microsoft Corp. Chief Executive Steve Ballmer to outline concerns that Vista's new functions could mean customers will not be offered a real choice on software packages, EU spokesman Jonathan Todd said Wednesday.

"We're concerned about the possibility that the next Vista operating system will include various elements which are currently available separately either from Microsoft or other companies," he told reporters.

Todd highlighted Vista's integrated Internet search, digital rights management used to protect copyrights and software that would create document formats comparable to Adobe's PDF.

Todd said Kroes' letter came after Microsoft asked regulators to set out any possible antitrust problems with Vista. Todd stressed that it was not the start of any formal probe.

"We assume that Microsoft has its own interests at heart. It wants to launch another product without having to worry about the [European] Commission instituting various actions under antitrust law," Todd said. "The Commission's concern is that computer manufacturers or consumers might be prevented from having a proper choice between different software packages."

Windows Vista is Microsoft's first major update to the company's flagship operating system since Windows XP was released in late 2001.

Microsoft said it could not comment on the letter because it had not received it. But it said consumers were free to use a wide range of competitor products and Vista was designed to respect the choices that consumers make.

"Keeping the industry and regulators informed of our product development plans has been, and will remain, a priority," Microsoft said in a statement. "We have worked hard to include partners and competitors in our planning so they can build products and services that work with Windows Vista."

Vista's ability to work with rival products also comes under EU scrutiny.

"There is also the possibility that we won't have all the necessary technical information so that competitors will be able to make a product that is compatible with Vista," Todd said.

Microsoft announced last week that the consumer version of Vista will be delayed again, until early next year, further extending the long gap between major Windows releases. A version for large business customers is due out in November.

Any investigation into Vista would be separate from Microsoft's ongoing legal challenge to a 2004 antitrust ruling that levied a record 497 million euros ($613 million) fine.

That EU ruling found the company guilty of squeezing rival media players out of the market and holding back technical information that would help software developers make products that worked with Windows.

On Thursday, Microsoft will speak before EU regulators at the start of a two-day hearing to defend itself against charges that it has not complied with the order to give software developers the information they need to make their products work with Windows.

The EU has threatened to fine the company 2 million euros ($2.4 million) a day backdated to Dec. 15, saying the technical manual it provided last December needed a radical overhaul to make it usable. It will decide after the hearing whether it will go ahead with the fines.

Microsoft insists the documents meet and exceed industry standards, and that the EU has not been clear about what it is looking for.

The EU rejects that contention, saying it has never asked for anything beyond the original order. The recent charges are based on reports from an independent monitor and other experts as well as discussions with the software companies that license the communications code at the heart of the dispute.

Microsoft has alleged that EU officials colluded with the monitor and rivals before it filed the charges.

It said it needs to see correspondence between them to help its case and has filed suit in the United States to force Sun Microsystems Inc. (SUNW), IBM Corp. (IBM), Oracle Corp. (ORCL) and Novell Inc. (NOVL) to hand over correspondence as evidence for its legal challenge to the 2004 ruling that will be heard by the EU's second-highest court in late April.