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South Korea Lowers Antitrust Boom on Microsoft

After weeks of delays, the South Korean Federal Trade Commission (FTC) ruled yesterday that Microsoft has taken advantage of its market dominance and engaged in unfair business practices in that country. The commission fined Microsoft $32 million and ordered the company to offer consumers two alternative versions of Microsoft Windows OS within 180 days.

According to the South Korean FTC, Microsoft violated that country's antitrust laws when it tied software products to its dominant Windows OS (this should sound familiar because similar antitrust charges were filed against Microsoft in the United States and Europe). The South Korean FTC ruled that Microsoft must make two version of Windows available to South Korean consumers: one version that doesn't include Windows Media Player (WMP) or Windows Messenger, and another version that includes WMP and Messenger as well as embedded links to competitors' Web sites so that consumers are aware of alternative media player and instant messaging (IM) applications. The two versions of Windows OS must be available in South Korea for at least 10 years, although Microsoft has the option to seek a review of the requirement in 5 years.

"This decision will restore competition in the previously distorted markets," says South Korean FTC Chairman Kang Chul-kyu. "\[It will also\] serve as an impetus for the domestic software industry, which has been behind in comparison to the hardware industry, to develop further."

Microsoft's South Korean antitrust troubles began in 2001 when Daum, a South Korean ISP and Internet portal company, complained that Microsoft violated the law by tying its IM application to Windows. Although Microsoft settled with Daum for $30 million in November, the South Korean FTC vowed to issue a ruling anyway.

Microsoft, predictably, has vowed to appeal the ruling. "We think this is very bad for Korean consumers and very bad for the industry in Korea and for mature innovation," said Microsoft Vice President and Deputy General Counsel Tom Burt. "Challenging this decision in court, we think we are going to win." The US Department of Justice also backed Microsoft, noting that "Korea's remedy goes beyond what is necessary or appropriate to protect consumers, as it requires the removal of products that consumers may prefer."

Although the ruling requiring Microsoft to ship alternative versions of Windows might seem similar to a European Union (EU) ruling that resulted in the software giant introducing the so-called Windows XP N Editions in Europe, both Microsoft and South Korea say that's not the case. Microsoft's Burt described the South Korean ruling as being "significantly different" than the earlier EU ruling, which is also pending appeal. And Kang said that South Korea "went one step further from the EU action and ordered Microsoft to carry access to competitors' programs."

Although the anti-Microsoft cabal will no doubt rejoice at the latest antitrust setback, the reality is that Microsoft will never deliver two new versions of Windows OS in 180 days. If history teaches us anything, it's that the software giant knows how to stall antitrust action in court. Expect more of the same in this case.

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