Microsoft has stated that it will not obey a ruling by the Korea Fair Trade Commission
Microsoft faces Windows ban in Korea
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07 Dec 2005, Simon Burns , V3
Microsoft could be forced to stop selling Windows in South Korea within six months, after the country's trade commissioners ordered the removal of parts of the operating system software.
The company told vnunet.com that, based on its current understanding, it would not obey the ruling because it does not comply with Korean law and Microsoft strongly believes it will be overturned on appeal.
In a stinging rebuke, antitrust regulators said today that Microsoft abused its dominant market position, drove competitors out of the market and hurt consumers.
The Korea Fair Trade Commission (KFTC) gave Microsoft 180 days to remove media and messaging applications from its Windows desktop operating system and Windows Server products sold in the country.
Microsoft had previously warned that it may be unable to comply, but today backtracked from that position. However, when European authorities requested similar action from the software company in 2004, it took Microsoft more than a year to complete the changes.
"We will not start to implement the changes," said Oliver Roll, Microsoft's Asia-Pacific region general marketing manager. "We will ask for a stay, and appeal to the Seoul high court."
Roll said he was confident that the appeal would succeed, but noted that Microsoft had not yet received a written version of the commission's findings.
Roll added that the requested changes did not seem to be as severe as the company had feared and would probably not force Microsoft to withdraw Windows from the Korean market as it had warned in October.
However, he conceded that, if the ruling does come into force, new product introductions could be delayed while Windows is altered.
It appears that, should this delay extend past six months, as it did in Europe, Microsoft could be left without a legal version of the Windows desktop or server OS for the Korean market.
The case stems from complaints that Microsoft took advantage of its effective monopoly in operating systems and dominance in the server market to crush competition in other markets.
The KFTC upheld these complaints saying that, after Microsoft included instant messaging and streaming media software free-of-charge with Windows, the market share of products from competitors Datum and RealNetworks collapsed to only five per cent.
The company was guilty of "unfairly excluding competitors or substantially harming consumer benefit", Korean regulators said.
"[Our] integration of instant messaging and media player functionality in Windows has created great value for consumers and opportunities for Korean developers," Microsoft responded in a statement.
"The ruling is bad for consumers, bad for IT and bad for innovation in Korea, " Roll added. "If the ruling comes into force, Korean developers will have higher costs and be at a competitive disadvantage."
Today's ruling orders Microsoft to make changes in both the Windows desktop operating system and Windows Server software. The ruling will be effective for 10 years and appears to apply to all present and future versions of the software.
But the KFTC said that Microsoft would be able to request a review after five years, "accounting for the changing market environment".
Regulators demanded that Microsoft make two different versions of Windows available in Korea. One would have the offending media and messaging applications stripped out, and another would include them but contain prominent links to competing products.
This is broadly similar to the remedy ordered by European regulators last year, who forced Microsoft to produce a version of Windows XP without the Media Player application. "There has been absolutely no demand for that product," said Roll.
Applications that will have to be removed from Windows under the ruling apparently include Windows Media Player, Windows Messenger, and Windows Media Service.
The penalties also include a fine of approximately $31m, about 0.08 per cent of Microsoft's estimated $35bn cash reserve.
Korea's population of 50 million is estimated to account for less than one per cent of Microsoft's worldwide sales, but the country has been an important test-bed for next-generation communications technologies because of widespread early adoption of broadband and sophisticated mobile services.
The Korean case may inspire similar action elsewhere. Microsoft has faced multiple antitrust-related legal battles in the US and Europe, and Asia is shaping up to be the next battleground.
"With the European Union also pushing for further unbundling this is incremental pressure on Microsoft," said Mike Davis, senior research analyst with the Butler Group.
In 2003, trade regulators in Taiwan forced Microsoft to cut its software prices by 26 per cent after claiming that the company abused its market dominance to increase prices.
Japan's Fair Trade Commission last year accused Microsoft of violating the country's anti-monopoly act, and called for the company to alter its business practices.
Microsoft immediately denied the charges, and the commission has made no further public statements on the matter.
In Singapore, the company asked for a draft anti-competition law to be changed last year. Antitrust allegations have also been made against Microsoft in several other countries.
"Other nations that want to encourage their own software industries may wish to take similar actions, but I do not see India being one of them as Microsoft is building up its investment there," said Davis.
"Maybe Microsoft has bought itself some 'insurance' in China by having one of its five research labs based in Beijing."
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