Microsoft escapes antitrust action in India on “lack of evidence”

Microsoft has escaped punitive action by the Indian competition watchdog after the law-firm that complained about its alleged abuse of monopoly failed to back up its case with evidence.

Microsoft India was dragged to the Competition Commission of India (CCI) in August last year by Delhi-based law firm Singhania & Partners after the company demanded higher prices from it for the Windows Operating System and Microsoft Office tools than was being charged from PC manufacturers.

Microsoft’s was one of the most high-profile cases taken up by the CCI since it started operating around two years ago.

The Law firm claimed that the product that it was purchasing — the Windows Vista OS and Microsoft Office 2007 — were identical to those that Microsoft was supplying to PC companies (like Dell, HP etc..)

However, the firm pointed out, instead of Rs 3.95 lakh that Microsoft was charging from PC vendors, it was demanding Rs 5.72 lakh from it.

“.. the different royalty rates being charged by [Microsoft] for different licenses is a strategy adopted by it to maintain its monopoly in the market under the garb of its licensing policy.

“.. the licensing policy is nothing but an artificial device for controlling the downstream distribution chain and a pretext for imposing unfair prices and conditions on consumers at the next level in the chain, which is prohibited in the [Competition] Act,” Singhania & Partners alleged.

Singhania & Partners also alleged that it was offering the differential pricing — with PC manufacturers being charged the least — to ensure that it continued to maintain its 90% market share in PC operating systems.

If all the manufacturers put Windows on their PCs at the time of manufacturing itself, Microsoft would have a natural advantage, the law firm said.

Because of these sweetheart deals with the PC manufacturers, Microsoft has prevented the rise of competition in the operating system market, the firm added.

In response, Microsoft denied that its differential pricing policy was intended to maintain its hold over the PC market.

“.. Microsoft’s agreement with the OEMs (PC manufacturers) does not require that OEMs can install Windows or Office exclusively on their PCs. OEMs are free to distribute PCs with non Microsoft Software or without [any] software at all.. approximately 30% of the PCs sold by OEMs in India have Windows preinstalled..” Microsoft countered.

The CCI accepted Microsoft’s contention that only 30% of PCs sold in India have Windows operating system preinstalled.

Microsoft pointed out that it is within its rights to offer discounts to PC manufactuers without being seen as trying to perpetuate its monopoly for two reasons.

One: its OEM business gives it much bigger scale than either institutional sales or retail sales and “the difference between the wholesale price and the retail price is common in every industry..” it pointed out.

Two: it pointed out that in case of OEM sale, part of the responsibility for providing ongoing support is taken on by the PC brand itself, while that is not the case in case of institutional sales.

At the end of the argument, the Competition Commission of India held that Singhania & Partners had failed to prove the following:

One — that the various products (and associated service) being sold to the OEM and institutions were the same.
Two — “because of its dominant position in operating systems and its agreement with the OEM manufacturers, it has driven any competitor out of the market.”

The Commission made it clear that though the allegations themselves were serious, the petitioner has totally failed to bring in evidence to back them up.

“The allegations and averments made by the informant [petitioner] have not been supported and corroborated in material particulars by any reliable evidence. In this respect, in the absence of any material to the contrary, the Commission sees no reason to disagree with the explanation offered by [Microsoft,]” it said, dismissing the case.