The European Commission has announced that it will investigate
plans by Microsoft and Time Warner to buy a Digital Rights
Management firm after an initial review gave rise to fears that the
purchase might create or strengthen a dominant position by
Microsoft in that sector.
The firm in question, ContentGuard is a leading provider of DRM
technology, which controls how copyrighted digital content, such as
DVDs or software, can be viewed, used, or abused.
Microsoft and Time Warner announced in April that they, together
with ContentGuard, had purchased most of the stake held in that
company by its original owner, Xerox.
As both Microsoft and Time Warner are industry leaders, the
joint acquisition required approval from EU competition regulators,
who were supposed to issue their initial verdict on the transaction
last week.
This verdict, which could have allowed the purchase to go ahead,
instead has launched an in-depth investigation. The Commission must
issue its final decision by 6th January 2005.
Under Microsoft's and Time Warner's joint ownership, said the
Commission yesterday, ContentGuard may have both the incentive and
the ability to use its patent portfolio to put Microsoft's rivals
in the DRM solutions market at a competitive disadvantage.
The Commission also warned that the joint acquisition could slow
down the development of open interoperability standards. As such,
this would allow the DRM solutions market to "tip" towards the
current leading provider, Microsoft.
DRM solutions are expected to become pervasive throughout the
entire IT industry, said the Commission. As a consequence, the
notified concentration may have spill-over effects on a number of
related markets ranging from mobile telephony to word
processors.
Microsoft can expect the Commission to consider any major
acquisitions with a critical eye, following the Commission's
finding in March this year that the software giant had broken
competition law by leveraging its near monopoly in the market for
PC operating systems onto the markets for work group server
operating systems and for media players.
The Commission imposed a €497.2 million fine on Microsoft and
obliged the company to "untie" the Windows Media Player from the
Windows operating system. The ruling has been challenged by
Microsoft and should come before the European Court of First
Instance in September.
