Microsoft says most if its software used in China is being used illegally

Microsoft faces anti-monopoly probe in China

Chinese officials have launched an anti-monopoly investigation into Microsoft’s Windows operating system stating interests of local companies as a reason.

China's State Administration for Industry & Commerce (SAIC) was also investigating a Microsoft vice president and senior managers, and had made copies of the firm's financial statements and contracts, the agency said on its website.

The SAIC said Microsoft had not fully disclosed information about Windows and its Office software suite. The agency said it launched the investigation after receiving reports from other companies although the names of the companies concerned have not been disclosed.

The SAIC said it had obtained documents, e-mails and other data from Microsoft's computers and servers, adding that it could not complete the investigation as Microsoft had said some of its key personnel were not in China.

Microsoft has been suspected of violating China's anti-monopoly law since June last year in relation to problems with compatibility, bundling and document authentication, the statement said.

However, western industry experts remain sceptical whether any violations occurred, saying that even though Microsoft’s operating system may have a dominant position in China, most of the software in use in the country is illegal due to high levels of piracy.

"It's ironic they can be accused of a monopoly in a mostly pirated operating system market, as they were criticised for ending support to mostly non-paid versions of Windows XP," said Duncan Clark, chairman of Beijing-based tech consultancy BDA,  referring to Microsoft halting support for the 13-year-old operating system in April.

Microsoft does have a wide range of operations in China, including research and development and teams for products such as Windows, Microsoft Office, servers, entertainment and hardware.

But its revenues for China, which Microsoft does not break out in its earnings statements, are very low. Former CEO Steve Ballmer reportedly told employees in 2011 that, because of piracy, Microsoft earned less revenue in China than in the Netherlands, even though computer sales matched those of the United States.

Microsoft said on Monday it had been visited by officials and that the company was "happy to answer the government's questions", a statement it repeated after the announcement from the regulator on Tuesday.

Some believe the recent wave of inquiries into western businesses operating in China is likely part of retaliation for the US indictment of five Chinese military officers for hacking US companies earlier this year.

Earlier this month, Qualcomm Inc, the world's biggest cellphone chip maker, was accused of overcharging and abusing its market position in China and is facing penalties that could exceed $1 billion.

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