Google’s Strength May Be Part of Microsoft Defense Strategy

8th, May- 2009

BERLIN — Microsoft will argue against a European Commission proposal that it promote competing browsers in its Windows operating system on the ground that such a move would strengthen its rival Google’s dominance in the global search-advertising market, according to a person with direct knowledge of Microsoft’s legal defense.
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The company will make the argument at a June hearing in Brussels as part of an antitrust inquiry about the packaging of its Internet Explorer browser with Windows, which powers more than 90 percent of the world’s personal computers.

The person with knowledge of Microsoft’s legal strategy, who declined to be named because he was not authorized to speak publicly about the case, said that Microsoft would outline what it saw as the damaging effects to the search-advertising industry of incorporating competing browsers — like Firefox from Mozilla or Chrome from Google — into Windows.

Mozilla derives the bulk of its income from the fees it receives for driving Web traffic to Google’s search engine. Google makes most of its revenue with advertising aimed at search results. Google dominates the search advertising sector.

“Not only would Google’s browser Chrome suddenly be on all Windows PCs, but it would strengthen Google’s dominance in search advertising,” said this person.

Google, in a statement, did not directly respond to Microsoft’s argument.

“We believe more competition will mean greater innovation on the Web and a better user experience for people everywhere,” said William Echikson, a Google spokesman in Brussels.

By aiming at its rival, Microsoft underscores the stakes for both it and Google, which are increasingly clashing as personal computing moves from software to the Web. Aside from competing in e-mail, online advertising and search, Google also makes an operating system used on mobile computers and cellphones.

The new European complaint over browsers, like the previous nine-year antitrust case centering on Microsoft’s media player and computer-server coding, has forced the biggest names in the global software and Web businesses to choose sides.

The complaint was brought in December 2007 by Opera, a tiny Norwegian software maker with 510 employees. Since then, Microsoft’s main competitors — Google, Mozilla, Sun Microsystems, Nokia, I.B.M., Adobe, Red Hat and Corel — have all signed on directly or through industry groups to argue as co-complainants.

Google, Mozilla and the European Committee for Interoperable Systems, a group based in Brussels representing the other Microsoft rivals, each plan to testify during the closed-door hearing next month before Michael Albers, a hearing officer in the European Commission’s competition section.

On Jan. 15, the commission informed Microsoft that it might order the software maker to preinstall competitors’ browsers in Windows, while simultaneously disabling Internet Explorer. Microsoft has warned investors that the case could lead to a “significant” fine. Microsoft paid more than 1 billion euros in fines and penalties fighting the first antitrust case, which it abandoned in 2007 after losing an important legal appeal.

According to the person, Microsoft will argue that Internet browsing is inseparable from the Windows operating system. Microsoft will also emphasize that consumers can download and use any competing browser with Windows, and that Internet Explorer’s share of the browser market has been falling steadily.

An estimated 67 percent of computer users around the world use Microsoft’s Internet Explorer, according to Net Applications, a researcher in Aliso Viejo, Calif. In Europe, the Firefox 3 browser has overtaken Internet Explorer 7 as the most-used browser, according to the Web analytics firm StatCounter. But it still trails Microsoft by 10 percentage points when all versions of the Explorer are counted.

The interoperable systems committee has said that it intended to present data at the hearing showing that Microsoft’s browser market share was closer to 85 percent in Europe.