State Department questions EU's Microsoft ruling

By Declan McCullagh
Posted on ZDNet News: Mar 30, 2004 11:21:00 PM

The U.S. State Department has quietly expressed its concerns to European regulators about last week's decision to levy harsh penalties and a $613 million fine on Microsoft.

The quiet protest from the Bush administration comes as concern is growing on Capitol Hill over the European Commission's penalties, which came after the Justice Department agreed to a consent decree that includes ongoing federal court oversight of Microsoft's business practices.

"The State Department has been involved in an off-the-record attempt to focus their attention" on the harm the decision could bring about, a U.S. government official, who has direct knowledge of the concerns communicated to EU regulators, told CNET News.com on condition of anonymity. A State Department representative declined to comment.

U.S. politicians gave at least six speeches over a three-day period last week on the floor of the Senate and House of Representatives, all of which condemned European Competition Commissioner Mario Monti's ruling that Microsoft violated antitrust laws and would have to unbundle Media Player from Windows.

The strongest denunciation came from Senate Majority Leader Bill Frist, R-Tenn., who said, "I now fear that the United States and EU are heading toward a new trade war--and that the commission's ruling against Microsoft is the first shot.

"In imposing this anticonsumer, anti-innovation penalty, the commission has blatantly undercut the settlement that was so carefully and painstakingly crafted with Microsoft by the U.S. Department of Justice and several state antitrust authorities. The commission's complete indifference to the negative impact of its ruling on American jobs, American consumers and the U.S. economy, and its total disregard of the Department of Justice, are intolerable."

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This is not the first time that the United States and the Europeans have clashed over antitrust enforcement. Hostilities erupted after the European Union vetoed the proposed General Electric-Honeywell merger, which U.S. regulators had already approved. President Bush publicly criticized the veto, which was widely viewed as a protectionist move designed to help European competitors such as Airbus and Lufthansa at the expense of U.S. companies.

Another point of contention is that U.S. officials sometimes view Europeans as unabashed fans of big government. In November 2001, William Kolasky, deputy assistant attorney general at the time, complained in a speech that the "European Union comes from a more statist tradition that places greater confidence in the utility of governmental intervention in markets."

Ten members of the House International Relations Committee--five Democrats and five Republicans--have written a letter to Monti protesting the sanctions on Microsoft. They claimed the decision violated the spirit of a 1991 "comity agreement" the Clinton administration renewed in 1998, which generally says that the United States should take the lead in overseeing U.S. companies.