Microsoft faces antitrust complaint from software trader

Dutch software trader Samir Abdalla has filed a broad antitrust complaint against Microsoft's pricing policies with the European Commission

Dutch software trader Samir Abdalla has filed a broad antitrust complaint against Microsoft with the European Commission, charging that the firm's pricing policies violate European Union treaties. The trader complains that Microsoft charges European users at least 30 percent higher prices than in the United States.

Abdalla has hired Houthoff, a well known legal firm with a broad representation in Brussels.

Microsoft last May filed legal charges against Abdalla for allegedly illegal export of software licenses. The software maker argued that Abdalla illegally sold home and student licenses with an estimated value of US$3.4 million.

Abdalla has always denied those charges. In response to Microsoft's complaint, he accused the firm of stifling the legal trade in grey software. Abdalla purchased software licenses in Egypt and then sold them in the U.S. The practice is known as grey trade and although banned in the E.U., it is allowed by U.S. authorities. Back in May, Abdalla promised to file charges with European authorities.

Although it took six months longer than planned, Abdalla earlier this month filed his legal complaint with the Directorate General for Competition. The body, which is headed up by Commissioner Neelie Kroes, has a long history battling Microsoft for antitrust violations.

Gerard van der Wal, an attorney with Houthoff, typifies the case as relatively easy. "Microsoft charges significantly higher prices for the same software in the eurozone than it does in the United States, even though the costs can hardly differ. We argue that Microsoft infringes on article 81 of the European Treaty, which outlaws cartels and agreements limiting competition, as well as article 82, which bans the abuse of a dominant position," Houthoff told Webwereld (in Dutch), an IDG affiliate.

Houthoff pointed to the 95 percent market share of Microsoft Office, which Abdalla purchased in Egypt and then sold in the U.S. "This software is five times more expensive in Europe than in Egypt. But we didn't use Egypt as an example because Microsoft could argue that special circumstances, such as lower wages, would play a factor in pricing decisions. The comparison with the United States is much more appropriate."

Abdalla has produced an extensive list, comparing retail prices between the U.S. and E.U. between 2004 and 2008. "Prices would differ between 30 and 50 percent. This is a consequent policy, except for Windows Vista where prices differ only 15 percent. The reason for that is well known," he said in an apparent jab at Vista's poor image.

He added that fluctuations in exchange rates didn't play any part, because Microsoft prices its software in U.S. dollars in both regions. "Differences often added up to 40.6 percent. You see that percentage a lot. It appears that Microsoft uses standard factors in calculating a markup."

Abdalla also complains that Microsoft is using anti piracy regulations to stifle the legal trade in grey software. The company furthermore illegally blocks distributors from providing CD-ROMs and DVDs with new computers, preventing consumers from deploying the software on a different machine, which Abdalla argues amounts to abuse of power. "We have added several cases where Microsoft refused to sell its software to resellers. These are serious violations of article 81 of the European antitrust rules," Abdalla told Webwereld.

Attorney Van der Wal wouldn't speculate on the next step in the legal case. "The question is what priority the European Commission attributes to this complaint. Does it deem this to be of great interest to society or not? I can imagine that this is of great interest because it harms Europe's competitive position. Companies and citizens are overpaying on their software by billions of euros."

The antitrust complaint doesn't affect Microsoft's case against Abdalla, which was filed in Los Angeles. Abdalla declined comment on that case.

Microsoft didn't respond to a request for comment on the antitrust suit over the course of two days. The company typically doesn't comment on pending litigation.