Microsoft hit with another antitrust suit
Published: 19 Dec 2003 08:50 GMT
Streaming-media provider RealNetworks on Thursday sued longtime nemesis Microsoft on antitrust charges, accusing the software giant of illegally using its Windows monopoly to hurt digital media rivals.
In the suit, filed in federal court in California, RealNetworks alleges that Microsoft has "pursued a broad course of predatory conduct over a period of years... resulting in substantial lost revenue and business for RealNetworks."
The complaint adds that Microsoft has wielded its "monopoly power to restrict how PC makers install competing media players while forcing every Windows user to take Microsoft's media player, whether they want it or not."
In a conference call with reporters, RealNetworks general counsel Bob Kimball said he believes the company's damages could exceed $1bn (£0.57bn) measured in lost business stemming from Microsoft's actions. The suit also seeks injunctive relief to prevent "further illegal conduct" by Microsoft.
Thursday's lawsuit is the latest in a long line of antitrust attacks on Microsoft, stretching back to 1995, when the Justice Department won a consent decree from the software giant in which it promised to behave fairly with competitors. Since then, Microsoft has been dogged by accusations of market abuse from rivals and authorities, including claims that it tried to knock Netscape Communications out of the browser market. Those charges led to a federal appeals court decision in 2001 finding the company had illegally abused its monopoly in desktop operating systems, followed by a settlement that many observers saw as a slap on the wrist.
Echoes of Netscape rang through Thursday's suit from RealNetworks.
"Our case is based on many of the same types of Microsoft conduct that have already (been) declared to be illegal -- such as failure to disclose interface information and imposing restrictions on PC makers -- as well as a broad course of additional predatory conduct," Kimball said.
Real said its lawsuit is complementary to the European Commission's ongoing investigation of Microsoft business practices. Real is cooperating with that inquiry.
In a statement, Microsoft responded that key allegations of the suit appeared to conflict with evidence of strong competition in the digital media market.
"RealNetworks' legal action today is unfortunate and particularly surprising given the intense competition in the digital media marketplace," Microsoft said. "The facts are clear. There is vibrant competition in this marketplace and Real Networks' own reported growth shows that they have thrived on Windows and many other operating system platforms. Computer manufacturers are free to install and promote any media player on new PCs. Consumers are free to use any media player -- and many consumers use several different media players."
The charges
Real's 64-page complaint accuses Microsoft of "tying" its Windows Media Player to its Windows operating system, shutting out competitors such as Real and instantly achieving
"virtually universal distribution." From October 2001 to March 2003, for example, Microsoft's "tying" ensured that Windows Media Player was preinstalled on about 95 percent of PCs shipped, the suit reads. By contrast, it continues, RealNetworks' digital media player was preinstalled on less than 2 percent of the estimated 207 million new PCs shipped.
RealNetworks said Microsoft has failed to share important information about the Windows code, thus hurting the performance of its RealPlayer product. For example, Microsoft refused to disclose details about certain security features, preventing Real from using them directly, according to the lawsuit.
Other charges allege that Microsoft used contractual restrictions and financial incentives to "force PC makers to accept Windows PC operating systems with the bundled Windows Media Player and to restrict the ability of PC makers to preinstall or promote competing digital media players."
According to the suit, PC makers told Real that their contracts with Microsoft kept them from removing or changing the status of a Windows Media Player; promoting RealOne subscription services during the first run of a new PC; and providing a desktop icon for Real Networks. "Microsoft's agreements with PC makers are exclusionary and anticompetitive," the suit concludes.
The suit also says Microsoft's pricing practices stifle competition. It alleges that Microsoft effectively forced competitors to provide free versions of their software to compete with Windows Media Player -- a practice that has resulted in significant losses for RealNetworks. "Microsoft's below cost pricing, separately or together with Microsoft's other exclusionary conduct, poses a dangerous probability of creating a monopoly in the digital media markets," RealNetworks said in the filing.
'Knifing the baby'
The suit is just the latest legal headache for Microsoft stemming from its efforts in digital media. Start-up Burst.com has filed a patent infringement suit against the software giant, accusing Microsoft of stealing the technology it uses in the latest version of its digital media software, Windows Media 9. And digital rights management developer InterTrust Technologies has filed a patent suit over security locks in Microsoft's media software to prevent unauthorised copying.
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