UPDATE 2-Russia probes laptop makers' use of Microsoft OS

Wed Jun 10, 2009 7:19pm EDT

* Probe concerns use of pre-installed Microsoft OS

* Agency says Microsoft is involved as a third party

* Follows separate probe into Microsoft launched last week

* Microsoft says hopes to resolve some issues soon (Recasts, adds details, further Microsoft comments, background)

By Maria Kiselyova

MOSCOW, June 10 (Reuters) - Russia's anti-trust regulator on Wednesday launched a probe into laptop makers whose machines contain pre-installed Microsoft Corp (MSFT.O) software -- the second Russian probe to hit the U.S. company in under a week.

The watchdog said it was investigating Acer Inc (2353.TW), Asustek (2357.TW), Toshiba Corp (6502.T), Hewlett-Packard (HPQ.N), Samsung Electronics (005930.KS) and Dell Inc DELL.O over "coordinated actions" when selling laptops with the pre-installed Windows operating system, and was treating Microsoft as a third party in the probe.

Dell declined to comment. Acer, Asustek, Toshiba, HP, and Samsung could not immediately be reached for comment.

Microsoft is already the subject of a probe by the Russian regulator over whether it broke competition law by holding back supplies of its Windows XP operating system to the Russian market. [ID:nL435248]

A statement on the regulator's website about the laptop maker probe said: "The signs of violation of the anti-monopoly legislation are seen in coordinated actions by laptop makers which have been pre-installing an operating system of the one same producer."

The Russian agency said that, in most cases, customers were unable to buy a laptop from the above-mentioned producers without the pre-installed Windows OS, or were not able to refuse to use the operating system they were given with the laptops.

Microsoft does not disclose the size of its Russian sales but says they had approached those in European markets in 2007.

Microsoft spokeswoman Marina Levina said the company had not received any notification from the Federal Anti-monopoly Service (FAS), the regulator, which will review the case on July 15.

Top Russian officials, including Prime Minister Vladimir Putin, have repeatedly criticised the anti-monopoly service for being a ceremonial agency which lacks real power.

Last year, its head, Igor Artemiyev, promised to turn the agency into a powerful tool to enforce market principles, and since then has slapped a number of fines on powerful Russian oil firms for price fixing in the domestic market.

The Russian probes into Microsoft come on top of ongoing charges by European regulators that it stymied rivals by tying the firm's Web browser to its dominant Windows system.

The European Commission said Microsoft shielded its Internet Explorer browser from head-to-head competition with rival products by bundling its Internet Explorer with Windows harming innovation and reducing customer choice. [ID:nN16306677]

Microsoft and the EU have been engaged in a running spat over competition for years, and the U.S. company has been fined several times for allegedly abusing its 95 percent dominance of personal computer systems through its Windows software.

REVENUE STREAM

The bulk of Microsoft's revenue comes from corporate customers, who make payments on long-term licensing contracts allowing them to upgrade to the newest versions of its software.

In reality, however, most customers do not upgrade immediately, forcing Microsoft to support older versions of the software.

Microsoft is keen to move customers onto newer versions, both to save on costs and to get them to adopt newer standards and systems that lock them into Microsoft's technologies.

The company has largely stopped selling Windows XP to retailers and major computer makers, forcing customers into using its successor, Windows Vista.

At last week's launch of the probe into sales of the XP operating system, the Russian regulator said it thought Microsoft violated anti-monopoly legislation by cutting delivery of Windows XP to Russia both separately and pre-installed on personal computers.

Chief executive of Microsoft Rus LLC, Nikolai Pryanishnikov, told Reuters on Wednesday the company hoped to resolve some of the issues raised in the probe by providing information.

"Further, if there is dialogue and some solutions are required, we will cooperate and meet all demands, and continue to work in Russia for the good of consumers."

Microsoft said in a separate comment the Windows XP OS was still available to Russian customers and many PC manufacturers and the company and its partners would continue to offer technical support for Windows XP until 2014. (Reporting by Maria Kiselyova; Additional reporting by Reed Stevenson in Amsterdam and Claire Baldwin in San Francisco; Editing by Simon Jessop, Gary Hill)

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