China gives Microsoft 20 days to answer anti-trust probe

More trouble for Microsoft is brewing in China as a special government investigation team gave Microsoft 20 days to respond to an anti-monopoly investigation that alleges software “compatibility issues” in Windows and Office, which may boil down to Microsoft's use of anti-piracy verification codes.

Vin Crosbie (Creative Commons BY or BY-SA)

Reuters noted that Microsoft’s use of verification codes “may have violated China’s anti-monopoly law.” Those codes are usually used to verify that software is legitimate and not pirated.

Duncan Clark, chairman of Beijing-based tech consultancy BDA, said, "It's hard to make sense of and hard to see how Microsoft can appease. How does an anti-piracy measure constitute monopolistic behavior if other suppliers can also use the same technique?"

Yet on September 1, China’s State Administration for Industry and Commerce (SAIC) gave Microsoft Vice President David Chen 20 days “to provide general information about the company and defend itself against the monopoly charges in a written report.” The translation from the SAIC website leaves much to be desired, but basically states that the SAIC task force will require Microsoft to explain “compatibility issues and other related issues” about Microsoft Windows and Office.

Microsoft said it was "serious about complying with China's laws and committed to addressing SAIC's questions and concerns."

Piracy of Microsoft’s software in China is so rampant that in 2011, former Microsoft CEO Steve Ballmer said that Microsoft’s “total revenue in China was less than the revenue in the Netherlands, a country of only about 17 million.” Ballmer pushed aside arguments that Chinese consumers couldn’t afford legitimate Microsoft software and insisted, "I'm not saying everybody in China could afford to buy a PC... but if you can, you could afford the software."

China has been griping about much more than Microsoft’s anti-piracy “verification codes,” but in July, four of Microsoft’s offices in China were raided as part of an official government investigation involving anti-trust matters. At that time, Microsoft said it would “actively cooperate” with and be “happy to answer” the Chinese government’s questions. In May, after citing computer security concerns and backdoors in Windows, the Chinese government banned Windows 8 from being installed on government PCs. Since then, China has been working on its own Linux-based operating system that may be ready to launch in October.

Last week, a Chinese antitrust regulator claimed that Microsoft's sale of "its media player and internet browser software in China have been 'problematic'." Similar complaints came out of Europe over a decade ago; Microsoft appealed but lost. The company was fined $1.85 billion and was forced to develop an OS that did not come bundled with IE or Windows media player.

Some Chinese users are also complaining about Microsoft ending it MSN messenger service. On August 31, Chinese users were notified that Microsoft will shut down the MSN chat program in 60 days. China is the only country still using the MSN service. The email notification said contacts would be backed up in Skype after Oct 31.

An unnamed source for Sina news previously claimed that Microsoft’s problems in China have less to do with Snowden revelations about U.S. government surveillance or backdoors and more to do with Microsoft’s decision to stop supporting Windows XP. In fact, insiders speculated that Microsoft’s decision to decommission Windows XP, the most popular OS in China, may allegedly “violate ‘anti-monopoly law,’ which led to the antitrust investigation.”

Microsoft CEO Satya Nadella is expected to visit China later this month, but it remains to be seen if that will help resolve any of China’s issues with the company.

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