EU in quandary on new action against Microsoft (Reuters)

BRUSSELS (Reuters) - Microsoft's (Nasdaq: - ) new Vistaoperating system has put the in a quandaryon whether to open a new front against the software giantbefore a court clarifies the EU antitrust watchdog's authority.

Rivals such as Google (Nasdaq: - ) and Adobe (Nasdaq: - ) are waryof the new version of Windows, set for release early next year.

They could formally ask the Commission to act and it couldorder changes in Vista, following on its landmark 2004antitrust decision that found Microsoft muscled out othercompanies.

But if the Court of First Instance (CFI) were to annul thatdecision, as Microsoft has asked, that would pull the legal rugout from under the Commission.

The problem is that the ruling by the 'ssecond-highest court may not arrive until after Vista is on themarket next year.

The Commission fined Microsoft nearly half a billion eurosin its 2004 decision and ordered sanctions, including the saleof a modified version of Windows. Microsoft appealed to theCFI, which heard arguments last month.

For the time being, Microsoft has not slowed down frompreparing Vista for market and the Commission is not backingoff from following up on its 2004 ruling.

Competition Commissioner Neelie Kroes told Microsoft in aletter in March that its plans for Vista could "deny PCmanufacturers and consumers a real choice among competingsoftware products and stifle innovation," the Commission said.

Microsoft argues it has scrupulously obeyed the law allalong and said its decisions to compete with Adobe were "guidedby a principled commitment to preserve healthy competition."

UNFINISHED BUSINESS

But the Commission has unfinished business trying toenforce its earlier sanctions against Microsoft, and iscontemplating fines of up to 2 million euros ($2.5 million) aday.

"The European Commission's provisional view is thatMicrosoft is still not compliant with the requirements of theMarch 2004 decision," spokesman Jonathan Todd said.

The Commission would have to send a direct order to forceMicrosoft to change Vista, if it found such a step werejustified. The pending court case muddies the waters.

The court could fully uphold the Commission's 2004 rulingor entirely throw it out. The court could also annul parts ofthe decision and set out a legal checklist for futureCommission action, as it has in the past.

The Commission has no way of knowing whether there will besuch a checklist or its contents, making action difficult.

Courts or competition authorities in the United States,Asia and Europe with jurisdiction over 31 countries have foundthe software giant illegally threw its weight around to shakeoff competitors. Adobe and Google wonder whether they are thenext targets of Microsoft.

Adobe, maker of the .pdf portable document format, givesaway readers but makes its money by selling the software toscan documents or print word-processed and other documents tothe popular non-changeable format.

Vista will include for free its own version of the Adobeproduct, called XPS, that does much the same thing.

Adobe's files are so-called "cross platform," which meansthey can be read by Microsoft, or Apple, among others.

Microsoft says XPS "can be licensed royalty free" and"implemented on other platforms and devices." In other words,it has not built cross-platform devices but has no objection ifothers do.

Then there is Internet search engine firm Google. The newversion of Microsoft's Internet Explorer has a built-in Windowto take computer buyers to a search engine.

Microsoft says it is up to computer makers, whichdistribute nine out of every 10 copies of Windows sold, todecide whether that Window should take users to Microsoft's MSNsearch engine, or some other.

Computers makers will be able to sell the space, Microsoftsays. Google did not return calls and e-mail seeking comment.

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