[Ecommerce] Article about Korea antitrust fine against Microsoft

[James Love]

This was from December.  Note that Jonathan Zuck is active in
defending Microsoft in this case.  The USPTO recent has nominated
Zuck for a large number of speeches at WIPO on patent policy.  Jamie

*  The Korea Fair Trade Commission (KFTC) has fined Microsoft 33
billion won (US$32 million) for abusing its market dominant position,
and ordered the software giant to modify the way it packages its
Windows products.

*  The commission pointed out that in December 2000, right after
Microsoft bundled its media player with Windows, Microsoft and rival
RealNetworks had 39 percent and 37 percent of Korea's media streaming
market, respectively. But recently, it said, Microsoft's market share
has increased to over 60 percent, while RealNetworks' share has
shrunk to 5 percent.  Korean companies that provide IM tools also
found themselves losing market share after Microsoft tied its MSN
Messenger to Windows, the KTFC noted, adding that Microsoft was able
to command a 65.2 percent market share in April 2004, leaving Korean
Internet service provider Daum with only 5.3 percent of the IM
market.   Microsoft's inclusion of Windows Media Service in its
Windows Server operating system also helped to increase the use of
streaming media based on Microsoft's media streaming technology. This
raised the barriers to entry for the PC and server operating system
market, the KFTC said.  The commission added that the new rulings
will restore competition in the previously distorted markets,
including respective markets for PC and server operating systems,
streaming media server and instant messaging. The decision will serve
as an impetus for Korea's domestic software industry to develop
further, which has been behind in comparison with the hardware
industry, the KFTC said.

*  Industry groups Computer Technology Industry Association (CompTIA)
and the Association for Competitive Technology (ACT) have openly
expressed their concerns over the ruling. Said Lars Liebeler,
antitrust counsel at CompTIA, in a statement: "Requiring Microsoft to
remove important components from its operating system, including
Windows Media Player, will affirmatively harm consumers and disrupt
the industry." . . . Said the ACT President Jonathan Zuck: "This is
the equivalent of the United States banning [Korea's] Hyundai from
shipping cars with built-in stereos because they compete with
products from [U.S. audio equipment maker] Bose.


http://www.zdnetasia.com/news/software/0,39044164,39296553,00.htm

Microsoft fined US$32M in Korean antitrust ruling
By Aaron Tan, ZDNet Asia
Wednesday, December 07 2005 03:56 PM

update The Korea Fair Trade Commission (KFTC) has fined Microsoft 33
billion won (US$32 million) for abusing its market dominant position,
and ordered the software giant to modify the way it packages its
Windows products.

According to a statement released today by the KFTC, Microsoft was
found to have violated Korea's Monopoly Regulation and Fair Trade Act
by bundling its Windows Media Service with the Windows Server
operating system, as well as its media player and instant messaging
(IM) program with Windows.

The KTFC said it found such practices liable, because they constitute
abuse of market dominant position and unfair trade practices under
the country's antitrust laws.

In addition, the bundling practices by Microsoft proved to have
eliminated competition, leading to the monopolization of the tied
product markets, the KTFC said.

Such practices "raised entry barriers" to the markets these products
play in, leading to the "restriction of market competition and
obstruction of consumer welfare", according to the commission.

Microsoft has disagreed with the KFTC rulings and will appeal the
decision which the software maker argues, is inconsistent with Korean
law.

The company said in a statement that its integration of IM and media
player functionality in Windows has created value for consumers, and
opportunities for Korean developers who write applications that run
on Windows and create devices for Windows.

"Competition in these technologies in Korea has been, and remains,
vibrant with many new Korean companies successfully offering digital
media and IM choices for Korean consumers," Microsoft said. "This
decision could have the effect of chilling innovation in Korea."

Under the ruling, Microsoft is required within 180 days to unbundle
the Windows Media Service from Windows Server operating system.

The software giant is also required to offer two versions of Windows--
one that is stripped of Windows Media Player and MSN Messenger, and
another with "Media Center" and "Messenger Center" features which
point users to Web pages that allow consumers to download competing
software.

Microsoft is also required to provide existing Windows users with
access to Media Center and Messenger Center through CDs or Web updates.

In explaining its ruling, the KTFC said that by tying its media
player to Windows, Microsoft was able to shift its monopoly to the
streaming media and IM market.

The commission pointed out that in December 2000, right after
Microsoft bundled its media player with Windows, Microsoft and rival
RealNetworks had 39 percent and 37 percent of Korea's media streaming
market, respectively. But recently, it said, Microsoft's market share
has increased to over 60 percent, while RealNetworks' share has
shrunk to 5 percent.

Korean companies that provide IM tools also found themselves losing
market share after Microsoft tied its MSN Messenger to Windows, the
KTFC noted, adding that Microsoft was able to command a 65.2 percent
market share in April 2004, leaving Korean Internet service provider
Daum with only 5.3 percent of the IM market.

Microsoft's inclusion of Windows Media Service in its Windows Server
operating system also helped to increase the use of streaming media
based on Microsoft's media streaming technology. This raised the
barriers to entry for the PC and server operating system market, the
KFTC said.

The commission added that the new rulings will restore competition in
the previously distorted markets, including respective markets for PC
and server operating systems, streaming media server and instant
messaging. The decision will serve as an impetus for Korea's domestic
software industry to develop further, which has been behind in
comparison with the hardware industry, the KFTC said.

It also urged Korean consumers and businesses to bear with any
inconveniences that might result from the ruling, and consider it as
"a way to participate in remedying the harm of monopoly, promoting
competition and developing [the local] software industry".

Industry groups Computer Technology Industry Association (CompTIA)
and the Association for Competitive Technology (ACT) have openly
expressed their concerns over the ruling. Said Lars Liebeler,
antitrust counsel at CompTIA, in a statement: "Requiring Microsoft to
remove important components from its operating system, including
Windows Media Player, will affirmatively harm consumers and disrupt
the industry."

"The ruling essentially establishes a new 'toll booth' upon those
companies that innovate and grow by providing consumers around the
world exactly what they want. Instead of looking at the marketplace
for answers, successful companies must design 'backward' to insure
they have satisfied the possible objections of market regulators,"
Liebeler added.

The ACT also believes the KFTC's decision is part of a global trend
toward "government micromanagement" of the technology industry that
could "endanger" the future of innovation and growth.

Said the ACT President Jonathan Zuck: "This is the equivalent of the
United States banning [Korea's] Hyundai from shipping cars with built-
in stereos because they compete with products from [U.S. audio
equipment maker] Bose.

"By dictating how successful companies can innovate their products,
this decision will have dangerous consequences for the industry and
consumers throughout the world."

Last month, Microsoft settled a lawsuit with Daum for US$30 million,
and RealNetworks dropped its antitrust complaints against Microsoft
in the Korean market after agreeing to a US$761 million settlement in
October.