Italian software maker contests Microsoft?s purchase of Skype . - Technology

Italian software maker contests Microsoft's purchase of Skype .

Reviving arguments that have dogged Microsoft in Europe for nearly two decades, an Italian software maker is asking European officials to block Microsoft's $8.5 billion purchase of Skype, the Internet phone service, unless it is removed from Microsoft's ubiquitous Windows Office platform.In the past, the European Commission has been sympathetic to complaints about Microsoft's strategy of "bundling" popular applications with Windows, eventually requiring the software maker to make concessions on its media player and Internet browser.But legal experts were split over whether the latest complaint, filed Sept. 20 by Messagenet, a company based in Milan that is a rival to Skype Internet's phone service, would complicate or prevent European approval of the takeover, which would be the largest in Microsoft's history and the largest takeover in the technology sector this year."These types of complaints from competitors are to be expected," said Denis Waelbroeck, an antitrust lawye r at Ashurts in Brussels. "I would expect that the commission will look at this seriously, but I think that in the end, the officials will reach their own independent decision. This doesn't mean the complaint will be upheld."Joaquin Almunia, the E.U. competition commissioner, plans to make his decision on the acquisition public on Oct. 7. A spokeswoman for Mr. Almunia, Amelia Torres, on Wednesday declined to comment on Messagenet's complaint. In general, she said the commission considered all submissions from competitors in antitrust cases.Mr. Almunia, a Spanish economist, had been competition commissioner for less than two months when his office approved Microsoft's takeover of Yahoo's search business in February 2010. A Brussels antitrust lawyer, who did not want to be identified for fear of alienating a potential client in Microsoft, said the Italian complaint could scupper the deal."I would certainly say this kind of complaint, if it raises new issues that the commission has not previously considered, may derail the deal or, at least delay approval," the lawyer said. Mr. Almunia could be persuaded to extend his present review into a more exhaustive second phase, which could take months or even years.Or, the lawyer said, Microsoft could seek to delay an immediate decision and buy time by requesting an extension to prepare an answer to the complaint. Jesse Verstraete, a spokesman for Microsoft in Brussels, said the company declined to comment on the allegations in the complaint from Messagenet."The proposed acquisition is still undergoing regulatory review and we are working closely with the agencies," Mr. Verstraete said. "Until all regulatory approvals are obtained, it is business as usual at Microsoft and at Skype."Besides asking Microsoft to "unbundle" Skype from Windows, Messagenet is urging European competition authorities to require Microsoft to effectively open Skype's Internet phone network, which had 124 million regular users in Jun e, to the services of rivals. Messagenet is asking the commission to do this by requiring Microsoft to disclose the confidential computer coding that would enable rival services to connect calls to Skype users.Skype's communication software does not operate with rival services. In May, after Microsoft announced its plans to buy Skype, the managing director of Messagenet, Andrea M. Galli, said he had written to Skype requesting the secret coding that would let the services interconnect, according to a copy of the complaint that Messagenet filed with the commission, and which was seen by the International Herald Tribune.Mr. Galli said Skype never responded to the request.Less than three weeks later, Skype ended its partnership with Digium, a company based in Huntsville, Alabama, whose software had enabled users of an open-source Internet phone service, Asterisk, to call and be called by Skype users.At that time, a Digium product manager, Rod Montgomery, lamented in a company b log that Skype for Asterisk, the Digium software, had been a "strong and steady seller."After Skype canceled the partnership, Digium stopped selling Skype for Asterisk on July 26. Mr. Montgomery said Skype had guaranteed to support and maintain the software for existing users for only two years, honoring a provision in its original contract with Digium.In his complaint, Mr. Galli said the Digium incident showed Microsoft's intention to keep Skype as a closed, proprietary software application, unavailable to rivals."The first effects of the proposed merger will be an even more rigid approach to interoperability of Skype services so to exclude competitors from the market," Mr. Galli wrote in the company's complaint.The U.S. Federal Trade Commission approved Microsoft's purchase of Skype on June 17, arguing that, with rival Internet phone operators Google Talk and Apple FaceTime, there was sufficient competition to let Microsoft's purchase proceed.But that rationale may be less persuasive in Europe, where none of the big global sellers of Internet video communication services are European companies, and where regulators have a track record of challenging Microsoft's bundling strategy.In 2009, under pressure from European officials, Microsoft agreed to distribute a ballot screen on Windows allowing users to choose their default browser from a list of 12, including Windows Internet Explorer.The agreement settled a complaint that had been filed by a small Norwegian browser maker, Opera, which had attracted support from Google and Mozilla, the makers of the Chrome and Firefox browers, respectively.The ballot screens, which Microsoft began distributing in early 2010, have sped the erosion of its browser share in Europe. Internet Explorer's market share in Europe slipped to 46.3 percent in April from 55.7 percent a year earlier, according to AT Internet, a research firm based in Merignac, France. During the same period Google's Chrome, Apple's Safari br owser and Opera all gained market share.In 2007, the commission required Microsoft to sell a version of Windows XP in Europe without its own media player, a condition it imposed to resolve a decade-long legal clash that ended with Microsoft's being convicted of antitrust violations and paying more than $1 billion in fines and penalties. But that remedy largely failed as European consumers rejected the stripped-down Windows version, which Microsoft was allowed to sell for the same price as the full version.