Security: Microsoft's Next Antitrust Battle?

Microsoft's moves into the security software market could be an agitator for more antitrust concerns over how it uses its market strength for other software offerings.

Last week, the company announced a new product for businesses called Microsoft Client Protection, with a beta version due before the end of the year. Also in the pipeline is Windows OneCare Live, an antivirus and spyware product for consumers due for a public beta release later this year.

The products are the fruit of Microsoft's commitment more than two years ago to offer antivirus products, which included acquiring antispyware technology and firms such as Sybari Software earlier this year and the Romanian antivirus software developer GeCAD Software in 2003.

One European antitrust lawyer sees the move into security software as another attempt by Microsoft to take advantage of its strength in operating systems in order to extend that strength into neighboring markets.

"It's the classic issue of what is the end of the legitimate scope of Microsoft's dominance," said Anthony Woolich, head of the European Union competition team at Lawrence Graham in London.

Familiar Argument

Microsoft's Windows Vista operating system will have security features that help protect computers from viruses, worms, and spyware, according to the company's Web site. But what security features will be in Vista and how those are tied to the operating system and interact with other products could be key.

The company plans to sell OneCare as an add-on annual subscription for Windows XP and Vista, said Rebecca Smith, a Microsoft spokesperson, in an e-mail response to a query.

Complaints against Microsoft in the European Commission last year showed that if a product can be sourced independently, "that would suggest it is a separate market," Woolich said. It would mean that arguing that security features are an integral part of an operating system may not apply in an antitrust battle, Woolich said.

Symantec said last week that it has provided information to the European Commission. Jonathan Todd, spokesperson for European Union Competition Commissioner Neelie Kroes, said last week that as a matter of practice he can't confirm ongoing investigations by the Commission.

Symantec Chief Executive Officer John Thompson on Tuesday confirmed documents were given to the Commission but sought to dampen speculation that a court fight was brewing. Symantec's relationship with Microsoft is one of "mutual dependency," he said, and that the company is not involved in a Commission investigation.

European Scrutiny

An earlier investigation into software bundling led, in May 2004, to the Commission ordering Microsoft to sell a version of Windows without its Media Player software and to offer licensing protocols used by its workgroup server software. The company was fined a record $596 million.

The ruling found that Microsoft abused its dominant market position by bundling its Media Player software with its OS without a legitimate business justification. The decision is on appeal to the European Court of First Instance.

But the ruling by the Commission only applied to Microsoft's bundling of the Media Player software, said Davina Garrod, a competition and regulatory lawyer with McDermott Will and Emery in London.

"The decision is limited to the facts of the case and so does not prohibit Microsoft from bundling other products with its OS if it wants," Garrod said.

Investment bank Goldman Sachs issued a statement Friday saying Microsoft appears to be trying to stay away from antitrust problems as it increases its security efforts. The company has not announced its security intentions for Vista, so it is "clear that there is not even an issue here," the report said.

But Microsoft must be cognizant of the Commission, as the precedent set could require the company to unbundle features it doesn't want to, such as security, Goldman Sachs said. U.S. antitrust law tends to permit the integration of additional features that benefit consumers--such as adding a radiator to a car--as long as it is not done with monopolist intent, the report said.