Microsoft vs. Europe: Possible truce, with Windows 7
By Peter Gumbel
Microsoft's titanic struggle with Europe's trust busters appears to be finally drawing to a close — thanks in part to Windows 7, the new operating system the U.S. software giant is releasing worldwide this week.
The two sides have been at loggerheads for a decade over the European Union's allegations that Microsoft has abused its dominant market position to push its own products such as Windows Media Player and the Internet Explorer web browser on consumers by bundling them with Windows — to the detriment of rival companies. It's a battle Microsoft (MSFT) has fought vigorously, but largely lost; it has been dragged into European courts and hit three times with fines that, together, total well over $1.5 billion.
But as it has geared up to launch Windows 7, Microsoft has changed tune — and so have the Europeans. "There's been a lot of progress in the past few months," Jean-Philippe Courtois, the Paris-based president of Microsoft's international operations, told Fortune. The atmosphere, he says, "is more serene."
It's a sign of the growing détente that Courtois himself, a 25-year Microsoft veteran, is currently serving as an official "ambassador" for a jamboree called the "Year of Creativity and Innovation" organized by the E.U.'s executive commission — the same body that has been taking Microsoft to task over its business practices. He will be sharing a podium in Brussels in early November with the commission's president, José-Manuel Barroso, and the other 14 ambassadors. "We're trying to be a partner with Europe," Courtois says, pointing out that Microsoft spends about $600 million on research and development in Europe, and provides thousands of jobs in the region.
Steve Jobs to Ed Colligan: Dear sir, let's collude
Jon Rubinstein. Photo: Palm, Inc.
"We must do whatever we can to stop this."
That's how Apple (AAPL) CEO Steve Jobs is reported to have asked then Palm (PALM) CEO Ed Colligan to enter into a possibly illegal agreement to stop trying to hire away each others' top engineering talent.
If accurate, it may be one of the most stilted attempts to collude ever recorded.
Colligan's answer, according to Bloomberg's Connie Guglielmo, who says she has reviewed the two-year-old communications:
"Your proposal that we agree that neither company will hire the other’s employees, regardless of the individual’s desires, is not only wrong, it is likely illegal."
Is this really how conspirators talk?
Apparently so in Silicon Valley, where hiring practices long overlooked have come under increased scrutiny by the Obama administration.
Google's anti-poaching smoking gun
Back in June, before the ties that bound the two companies unraveled and Google's (GOOG) Eric Schmidt resigned from Apple's (AAPL) board of directors, the New York Times reported that the U.S. Department of Justice had begun an antitrust investigation into the two companies' hiring practices.
The issue was whether Apple and Google had made an anti-poaching deal — an agreement not to go fishing each others' talent pool — that could be considered a collusive restraint on trade.
The Times had obtained an e-mail from a Google recruiter that was very suggestive. It asked one job candidate to reach out to another potential candidate.
"It is a bit touchy since he works for Apple,” the recruiter wrote, adding that Google had “a nonsolicit agreement with them.”
But the authenticity of the e-mail could not be verified and the recruiter, who has since left Google, said she didn't recall sending it.
Now we have what looks like a smoking gun.
Antitrust: Apple and AT&T in DOJ's sights
The U.S. government agencies in charge of policing antitrust violations — long dormant under the Bush administration and newly revitalized under Barack Obama's — seem to be circling closer to Cupertino.
According to a report Monday in the Wall Street Journal's online edition, the Department of Justice has begun an initial review of the U.S. telecommunications industry to determine whether the two dominant players — AT&T (T) and Verizon (VZ), which together control 90 million U.S. landlines and 60% of the country's 270 million wireless subscribers — are abusing the market power they have amassed in recent years.
Although not a primary target of the probe, Apple (AAPL) could get ensnared in it, according to the Journal's report.
"Among the areas the Justice Department could explore," writes the WSJ's Amol Sharma, "is whether wireless carriers are hurting smaller competitors by locking up popular phones through exclusive agreements with handset makers, according to [people familiar with the matter.] In recent weeks lawmakers and regulators have raised questions about deals such as AT&T's exclusive right to provide service for Apple Inc.'s popular iPhone in the U.S."
Antitrust inquiry: How Apple and Google compete
Given the looming presence of Microsoft (MSFT) on the PC desktop, we tend to think of Apple (AAPL) and Google (GOOG) as corporate best friends united by a common enemy.
But the news Monday night that the U.S. government has opened an inquiry into the two companies' "interlocking directorates" under the Clayton Antitrust Act has prompted a fresh look at the extent to which Apple and Google are, in fact, competitors.
We assume, by the way, that the red flag that caught the attention of the Federal Trade Commission is Google CEO Eric Schmidt's seat on Apple's board, since the only other overlap is Arthur Levinson, former chief executive of Genentech (DNA), a gene-splicing company.
Schmidt is known to recuse himself from Apple board meetings when the iPhone is discussed. That makes sense. It wouldn't be fair for Google's team Android to get inside information about Apple's plans for future mobile devices.
But does Schmidt leave the room when Safari comes up? Or iTunes? Or MobileMe?
When you start to look at the hundreds of software products Apple and Google make — especially on the Web — things quickly get pretty complicated. Here's a partial list of the areas in which we know Apple and Google compete:
- Smartphone operating systems: iPhone vs. Android
- Web browsers: Safari vs. Chrome
- Music and video: iTunes vs. YouTube
- Cloud computing: MobileMe vs. iGoogle
- e-mail services: Mail vs. Gmail
- Address lists: Address Book vs. Contacts
- Calendars: iCal vs. Google Calendar
- Chat: iChat vs. Google Talk
- Photos: iPhoto vs. Picasa
- File storage: iDisk vs. Google Docs
There could be many more. If you spot any we've missed, put them in the comment stream and we'll add them here.
By the way, according to the New York Times, which broke this story, interlocking directorates rarely lead to major confrontations between companies and the government. It's easier just to ask the director or directors in question to resign from one board or the other.
Arthur Levinson's seats are probably safe.
Antitrust: Apple accused of bullying Microsoft
In a case rich in irony, an antitrust suit has been filed against Apple (AAPL) accusing the company of illegally maintaining a monopoly in the digital music market by failing to support Microsoft's (MSFT) Windows Media Audio format.
The suit was filed Dec. 31 in San Jose and brought to light Thursday afternoon by InformationWeek. The plaintiff is Stacie Somers, a San Diego-based attorney represented in this case by a gaggle of class-action specialists: Craig Briskin and Steven Skalet of Mehri & Skalet, Alreen Haeggquist of Haeggquist Law Group, and Helen Zeldes. See filing here (subscription required).
Microsoft, of course, is the company usually associated with charges of antitrust behavior, most famously for tying Windows to Internet Explorer in United States v. Microsoft. Apple was named in that case, along with Netscape and Java, as one of the threats to its monopoly that Microsoft tried to crush.
But now the New Balance 991s are on the other foot, according to Somers' lawsuit, which quotes Steve Jobs as bragging that Apple's iTunes store is now "the Microsoft of music stores."
According to the complaint, Apple controls 75 percent of the online video market, 83 percent of the online music market, more than 90 percent of the hard-drive based music player market, and 70 percent of the Flash-based music player market.
Yet among the major digital music vendors, Apple is alone in not supporting Windows Media Audio. The suit estimates that Apple could license WMA from Microsoft for less than $1 million — or about 3 cents for each iPod sold in 2005.
According to InformationWeek:
… the complaint goes beyond software licensing politics and charges Apple with deliberately designing its iPod hardware to be incompatible with WMA. One of the third-party components in iPods, the Portal Player System-On-A-Chip, supports WMA, according to the complaint. "Apple, however, deliberately designed the iPod's software so that it would only play a single protected digital format, Apple's FairPlay-modified AAC format," the complaint states. "Deliberately disabling a desirable feature of a computer product is known as 'crippling' a product, and software that does this is known as 'crippleware.' " (link)
Apple has faced other antitrust charges over its dominant position in digital music. See for example here. Most of these cases, however, complain that Apple maintains its grip by tying the iPod to the iTunes store. This is the first time Apple has been charged with trying to muscle Microsoft out of the market.
Apple, as usual, is declining to comment on pending litigation.
