Beyond Binary

The European Union is considering forcing Microsoft to distribute rival browsers as part of Windows, the software maker disclosed in a regulatory filing this week.

As part of its quarterly filing with the Securities and Exchange Commission filed on Thursday, the software maker offered more details on the EU's statement last week that it believes Microsoft's inclusion of a browser in Windows violates antitrust law.

Microsoft said that the EU is considering forcing computer makers, known as original equipment manufacturers, or OEMs, to offer multiple browsers with new Windows PCs.

"While computer users and OEMs are already free to run any Web browsing software on Windows, the commission is considering ordering Microsoft and OEMs to obligate users to choose a particular browser when setting up a new PC," Microsoft said in the SEC filing. "Such a remedy might include a requirement that OEMs distribute multiple browsers on new Windows-based PCs. We may also be required to disable certain unspecified Internet Explorer software code if a user chooses a competing browser."

Microsoft also noted that the EU is also seeking to "impose a significant fine based on sales of Windows operating systems in the European Union."

The company reiterated that it will have the opportunity to respond in writing in the next two months and, after that, could also request a hearing.

And that's not the only area where Microsoft faces further EU action. Microsoft confirmed that an investigation into Office may still be ongoing.

"In January 2008, the commission opened an additional competition law investigation that relates primarily to interoperability with respect to our Microsoft Office family of products," Microsoft said. "This investigation resulted from complaints filed with the commission by a trade association of Microsoft's competitors."

In a case of convenient timing, Opera Software's top developer happened to be in CNET's office just after Microsoft disclosed that the European Union has objected to Microsoft's bundling of a Web browser into Windows.

"We think it is right of the EU, for the sake of the consumers, to be concerned about someone potentially misusing their competitive power," Chief Development Officer Christen Krogh told CNET News. The EU action stems from a 2007 complaint by Opera.

Krogh said the Internet is too important for consumer choice to be limited. Developers of software and services, he remarked, shouldn't have to "attach them to something which is proprietary."

The fact that Microsoft's market share has dropped, he said, doesn't ensure that true choice will win out. "There has been more competition before," he said, referring to the Netscape and pre-Netscape days. "Fair competition does not necessarily prevail. We still think whenever a platform has a sufficiently high market share, it should be open and easy for consumers to choose their component to access the Internet."

Even if IE's market share drops to below 60 percent in Europe, Krogh said, "we think that is sufficiently high to be concerned."

Krogh's comments were echoed by other Opera executives in a statement provided by the company.

"On behalf of all Internet users, we commend the Commission for taking the next step towards restoring competition in a market that Microsoft has strangled for more than a decade, wrote Jon von Tetzchner, Opera's CEO. "The Commission's Statement of Objections demonstrates that the Commission is serious about getting Microsoft to start competing on the merits in the browser market and letting consumers have a real choice of Internet browsers."

Opera noted that it follows the same principles applied by the EU in 2004, when it held that Microsoft could not tie its media player to Windows and ordered the software maker to offer a version with the media player stripped out.

"The Court of First Instance's judgment was clear that Microsoft illegally tied Media Player to Windows," said Jason Hoida, deputy general counsel at Opera. "We are not surprised that the Commission has issued a Statement of Objections based on the principles in that judgment. We are confident that the Commission will ultimately conclude that Microsoft has violated European competition law again and that it will take all necessary actions to restore competition and consumer choice in this important market."

The European Union's new complaint against Microsoft really takes one back. Like, a decade or so.

Its objection--that bundling a browser into the operating system violates antitrust law--is the same one that U.S. regulators raised in 1996.

The newest allegations stem from a 2007 complaint by Norway's Opera that Microsoft was hurting competition by including Internet Explorer in Windows and by not better adhering to Web standards.

What is most odd about the EU taking up the issue is its timing. The EU spent years going after Microsoft on antitrust matters related specifically to its bundling of products with Windows and didn't focus on the browser. Plus, the move comes as Microsoft's browser share is at its lowest point since the Netscape days.

Firefox is particularly strong in Europe, the area over which the EU has oversight. According to XitiMonitor, IE had a 59.5 percent share in Europe as of November, compared with 31.1 percent for Firefox. Opera had about 5 percent, and Safari half of that. Microsoft lost a full 5 percentage points of market share since April alone.

That doesn't mean that Microsoft will have an easy time in Brussels. As it has shown in the past, the EU is willing to take a tough line with Microsoft, and it is not averse to fining the company and issuing harsh decrees.

David Anderson, an antitrust attorney and partner with Berwin Leighton Paisner in Brussels, said that Microsoft may well face a challenge ahead in persuading the Commission to set aside its preliminary assessment, saying the commission tends to review matters thoroughly before issuing such "statements of objections."

Further he noted that the commission staff may feel emboldened after having won its previous case against Microsoft. It also has the same set of attorneys that worked on that case pursuing the IE issue, Anderson said.

Microsoft is choosing its words carefully at this point, electing not to go beyond a statement that is more procedural than confrontational. But I can only imagine the words being used behind closed doors in Redmond.

In defending itself, Microsoft will find itself against one particularly familiar foe. Opera's chairman, William Raduchel, is a longtime Microsoft critic, dating back to his time at Sun Microsystems, which brought antitrust actions of its own against Microsoft before eventually settling.

For those who need a refresher course in the browser wars, Netscape had the dominant program in the Web's early days, controlling more than half the market as late as 1997. By 1999, though, Microsoft's IE had more than three-fourths of the market.

It has held the dominant position ever since, accounting for greater than 90 percent of the market through 2004, when Firefox began to make serious inroads. Its share has been on the decline since, according to Net Applications.

Microsoft's browser had an 87 percent share in 2005, but by 2007, its share had dropped to 79 percent. Last year alone, IE's market share dropped from 75 percent in January to 68 percent by December.

CNET News' Dawn Kawamoto contributed to this report.