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Tuesday October 23, 7:47 PM

Antitrust cloud still hangs over Microsoft amid Windows XP launch

Microsoft launches its new Windows XP operating system this week even as the software giant faces the possibility of stiff sanctions in the United States and Europe for abusing its monopoly position.

Moreover, critics say the new operating system shows Microsoft has failed to learn from its antitrust woes and that Windows XP does further damage to competitors by steering users to services and websites operated by Microsoft and its partners.

"Windows XP advances the company's illegal anti-competitive practices and harms the nation's consumers," said a report last month from a coalition of consumer groups including Consumers Union and the Consumer Federation of America.

The system, due to be launched Thursday, is controversial because it incorporates several programs such as media players and instant messaging that may harm competitors.

Although Microsoft no longer faces an imminent breakup as ordered last year by a federal judge, the company's antitrust woes are far from over.

A US appeals court on June 28 had upheld a finding that Microsoft acted as an illegal monopoly. But it said the breakup of the company ordered last year by Judge Thomas Penfield Jackson was not justified by the evidence and that a new penalty must be determined in the lower court, with a new judge.

On September 6, the US government abandoned its demand for a breakup of the software titan, saying it was hoping to speed up a resolution of the case. Government lawyers also have dropped a complaint that Microsoft unfairly tied the Internet Explorer Web browser into the Windows operating system.

The new judge, Colleen Kollar-Kotelly, has named a mediator in an effort to help the parties reach an out-of-court settlement by November 2.

But at the same time, several states among those that have joined the federal government lawsuit, have promised to again sue the company if the remedies fail to adequately address problems in Windows XP.

And reports have said the European Commission, which is leading its own antitrust probe, may fine Microsoft billions of dollars if the company is guilty of using Windows XP to extend its monopoly position.

Windows XP incorporates a number of new features that in the past had been separate software that competes with those from Microsoft rivals.

For example, users will be steered to Microsoft for instant messaging, media players for audio and video as well as digital photography.

The operating system will also help direct consumers and business users to Microsoft's .Net initiatives -- a collection of websites of Microsoft and its partners.

Part of this initiative is the Microsoft Passport authentication service, which prompts users to sign in only once to then visit websites that accept the system.

Mark Cooper of the Consumer Federation said that, with Passport, "Microsoft is creating an entirely new basis of market power that would reside in the control of personal information."

Microsoft chairman Bill Gates, in an interview earlier this year with CNET, said that the company wants the freedom to innovate and improve its products as it goes up against competitors like America Online.

"Our customers do want us to make Windows richer and more reliable," Gates said. "So Microsoft's commitment is to add features that customers want. Has AOL ever added any new features to their products?"

Nicholas Economides, a New York University antitrust expert, said the current environment is not necessarily negative for Microsoft's launch.

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