Microsoft is under investigation by a Chinese competition watchdog

China investigates Microsoft over software bundling

Microsoft is being investigated by a Chinese competition watchdog over the bundling of its Windows web browser and media player.

The State Administration for Industry and Commerce (SAIC) suspects Microsoft of not being fully transparent with information about its Windows and Office sales, but the company has expressed willingness to cooperate with ongoing investigations, Zhang Mao, the head of the competition regulator, told reporters at a briefing in Beijing today.

The issue of how Microsoft bundled its web browser and media player became the focus of respective antitrust cases brought by US and European authorities in the 1990s and 2000s as Windows established itself as the world's dominant operating system.

Microsoft settled in 2001 with the US Department of Justice a long-running case centring around whether it could bundle its flagship Internet Explorer browser with Windows.

In 2004, the European Union ordered Microsoft to pay a €497m (£396m) fine and produce a version of Windows without the Windows Media Player bundled. The fine was later increased to nearly €1.4bn.

China's focus on two products previously litigated elsewhere appears to form the basis of its investigation, but the probe could extend beyond the media player and browser bundling issue, said You Youting, a partner at Shanghai Debund Law Offices.

"It's possible the government hasn't been successful in finding what they're looking for," You said. "But by starting with these two products, it gives them time."

A Microsoft spokesman declined to comment when contacted by telephone.

The Microsoft investigation comes amid a spate of competition probes against foreign firms in China, including mobile chipset maker Qualcomm and German car maker Daimler AG's luxury auto unit Mercedes-Benz. The probes have renewed fears of Chinese protectionism.

The SAIC said earlier this month that Microsoft had been suspected of violating China's anti-monopoly law since June last year in relation to problems with compatibility, bundling and document authentication for its Windows operating system and Microsoft Office software.

The SAIC, one of China's three anti-monopoly regulators, formally announced its investigation into Microsoft's activities this month after officials raided Microsoft offices in several major cities and met Microsoft Deputy General Counsel Mary Snapp for questioning in Beijing.

"The investigation is presently ongoing, and we will disclose the results to the public in a timely fashion," Zhang said, adding that the probe is one of nine opened this year which include the software, tobacco, telecommunications, insurance, tourism and utilities sectors.

The news comes just days after the announcement that China could have a new homegrown operating system by October to take on imported rivals such as Microsoft, Google and Apple.

The operating system would first appear on desktop devices and later extend to smartphone and other mobile devices, the Xinhua news agency said on Sunday, citing Ni Guangnan who heads an official OS development alliance established in March.

"We hope to launch a Chinese-made desktop operating system by October supporting app stores," Ni told the People's Post and Telecommunications News, an official trade paper run by the Ministry of Industry and Information Technology (MIIT).

He said he hoped domestically built software would be able to replace desktop operating systems within one to two years and mobile operating systems within three to five years.

In May, China banned government use of Windows 8, Microsoft's latest operating system, a blow to the US technology firm's business. Ni said the ban on Windows 8 was a big opportunity for the Chinese sector to push forward its own systems, but that the industry needed further development and investment.

"Creating an environment that allows us to contend with Google, Apple and Microsoft - that is the key to success," he added.

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