All Things Digital

Microsoft (MSFT) is appealing the $1.38 billion fine given it by the European Commission for failing to comply with a landmark antitrust ruling in what it describes as a “constructive effort to seek clarity from the court.”

By “clarity,” Microsoft means an annulment of the EC’s February decision imposing the fine–the highest ever meted out in an antitrust case. But it’s not likely to get it. At least according to the EC. Said an EC spokesperson: “The commission is confident that its decision to impose the fine is legally sound.”

Translation: No. How’s that for “clarity”?

If the major search engines took the privacy of their users as seriously as they claim, they wouldn’t hold onto their personal search data for so long. That’s the opinion of Europe’s Article 29 Data Protection Working Party, which today recommended that the European Union require search engine providers to “delete or irreversibly anonymize data once they no longer serve the specific and legitimate purpose they were collected for.” The Working Party figures that ought to be about six months.

That will no doubt come as a shock to Google (GOOG), Yahoo (YHOO) and Microsoft (MSFT), who all retain search data for a year or more. But it can’t be nearly as shocking as the Working Party’s recommendation that IP, or Internet Protocol, addresses be protected as personal information, a requirement that, were it to be implemented, could interfere with their ability to deliver relevant ads.

From the Working Party document:

A key conclusion of this opinion is that the Data Protection Directive generally applies to the processing of personal data by search engines, even when their headquarters are outside the EEA, and that the onus is on search engines in this position to clarify their role in the EEA and the scope of their responsibilities under the Directive.

“This Opinion concludes that personal data must only be processed for legitimate purposes. Search-engine providers must delete or irreversibly anonymize personal data once they no longer serve the specified and legitimate purpose they were collected for and be capable of justifying retention and the longevity of cookies deployed at all times. The consent of the user must be sought for all planned cross-relation of user data, user-profile enrichment exercises. Web site editor opt-outs must be respected by search engines and requests from users to update/refresh caches must be complied with immediately. The Working Party recalls the obligation of search engines to clearly inform the users upfront of all intended uses of their data and to respect their right to readily access, inspect or correct their personal data.”

We would be disappointed in 2008-2009 if we don’t have a very significant position in the display-ad marketplace.

- Tim Armstrong, Google’s North American president for advertising and commerce

Looks like Google’s informal corporate motto, “Don’t Be Evil,” was assurance enough for the European regulators reviewing the company’s proposed merger with online ad-serving vendor DoubleClick.

The European Commission this morning approved Google’s (GOOG) $3.1 billion acquisition of DoubleClick, clearing the way for the unprecedented combination of their advertising services, as well as their vast troves of data about consumer behavior on the Internet.

In a statement, the EC said the deal would be unlikely to have harmful effects on consumers and can proceed without conditions. “The Commission found that the merged entity would not have the ability to engage in strategies aimed at marginalizing Google’s competitors, mainly because of the presence of credible ad-serving alternatives to which customers (publishers/advertisers/ad networks) can switch, in particular vertically integrated companies such as Microsoft, Yahoo and AOL,” the EC explained. “The market investigation also found that the merged entity would not have the incentive to close off access for competitors in the ad-serving market, mainly because such strategies would be unlikely to be profitable.”

Less than two hours after the EU granted its approval, Google announced that the deal had closed. Google CEO Eric Schmidt declared himself “thrilled.” As well he should be: Shares of Google, which have lately been trading down, were up by as much as $18 this morning, or more than 4%, at about $431.

… For Google, privacy did not begin and does not end with our acquisition of DoubleClick. And we believe that privacy for legislators, regulators, privacy groups and other stakeholders shouldn’t begin or end with Google. Privacy is a serious issue that spans several industries from financial services to entertainment to e-commerce, and that ought to be addressed holistically in the interest of individuals throughout Europe and the world. One particular company–and certainly one particular merger–should not be singled out.”

–Peter Fleischer, Google’s Global Privacy Counsel

The Federal Trade Commission’s decision to approve Google’s proposed $3.1 billion acquisition of online ad-serving vendor DoubleClick without condition hasn’t exactly elicited resounding calls of huzzah! from the European Union. On the contrary, European parliamentarians seem out to spoil the deal.

At a hearing before the European Parliament’s Civil Liberties Committee to discuss the legality of search companies’ privacy policies, talk quickly turned to the acquisition and its potential impact on citizens’ online privacy. Seems a few of the EU’s top privacy regulators feel that IP, or Internet Protocol, addresses should be protected as personal information when they can be used to identify an individual on a computer network. Google, which uses IP addresses to identify users’ geographical location, among other things, disagrees.

After first upbraiding the committee for attempting to shoehorn a privacy case into a competition law review, Peter Fleischer, Google’s Global Privacy Counsel, pointed out that IP addresses aren’t always personally identifiable. “There is no black or white answer: Sometimes an IP address can be considered as personal data and sometimes not,” he said. “It depends on the context and which personal information it reveals.” And this is true to some extent, but becoming less so as we move toward Internet Protocol version 6 (IPv6).

Of course, were IP addresses to be categorized as personal information, Google would have a more difficult time delivering relevant search results and, more importantly, ads. Which, as Dutch parliamentarian Sophie in ‘t Veld pointed out is the real reason Google is arguing so vehemently against treating IP addresses as sensitive personal data. “The reason you want to have the data is because it gives you a competitive advantage,” she said. “It is business. I don’t think they can be completely disconnected. And we should discuss that side of things too. … Having that much information is market power.”

Looks like Microsoft CEO Steve Ballmer may have a shot at a second dinner date with EU Competition Commissioner Neelie Kroes.

Less than three months after agreeing to comply with key elements of the European Commission’s 2004 antitrust order against it, the company is facing new accusations of monopoly abuse. Norway’s Opera Software ASA said today it has filed an antitrust suit against Microsoft in the European Union, accusing it of stifling competition by tying its Internet Explorer Web browser to Windows and hindering interoperability by not implementing widely accepted Web standards.

“We are filing this complaint on behalf of all consumers who are tired of having a monopolist make choices for them,” Opera CEO Jon von Tetzchner said in a rather here-I-come-to-save-the-day statement. “In addition to promoting the free choice of individual consumers, we are a champion of open Web standards and cross-platform innovation. We cannot rest until we’ve brought fair and equitable options to consumers worldwide.”

And reminded the world that Opera is not just a drama set to music, but an unpopular Web browser, as well.

Opera asks that the EC’s competition division force Microsoft to unbundle IE from Windows and require the company to follow fundamental and open Web standards, which is an interesting twist on the old antitrust classic. And one that may have some legs, given IE’s inability to pass the Web Standards Project Acid2 test. “Microsoft often participates and even promises to support these standards, but we find it often isn’t the case,” Opera CTO Håkon Wium Lie told ZDNet. “We find bugs and programmers have to code around (Microsoft).”

Looks like European Competition Commissioner Neelie Kroes is going to go down in history as the person who finally humbled Microsoft. This morning Microsoft admitted defeat in its nine-year battle with the European Commission, agreeing to comply with key elements of the EC’s 2004 antitrust order against it.

“At the time the Court of First Instance issued its judgment in September, Microsoft committed to taking any further steps necessary to achieve full compliance with the commission’s decision. We have undertaken a constructive discussion with the commission and have now agreed on those additional steps,” Microsoft said in a statement. “We will … continue to work closely with the commission and the industry to ensure a flourishing and competitive environment for information technology in Europe and around the world.”

Quite the change of heart for a company that once trashed the European Union for dreaming up “new laws” that could hurt others in the technology industry.

And so, after more than three years of legal wrangling and nearly $1.43 billion in fines, Microsoft will license key “interoperability information” to rivals who need it to make their software compatible with Windows, which will likely have huge ramifications for the industry.

“Now that Microsoft has agreed to comply with the 2004 decision, the company can no longer use the market power derived from its 95% share of the PC operating system market and 80% profit margin to harm consumers by killing competition on any market it wishes,” Kroes said. “These changes in Microsoft’s business practices, in particular toward open-source developers, will profoundly affect the software industry. The repercussions of these changes will start now and will continue for years to come.”

And we wonder why the stereotype of the ugly American–voracious, arrogant and self-interested–is so firmly in place in Europe…

This morning European Union Competition Commissioner Neelie Kroes lambasted the U.S. Justice Department for its criticism of the European Court of First Instance’s ruling on an antitrust judgment against Microsoft. Issued Monday, the court’s decision to dismiss Microsoft’s appeal of a landmark 2004 ruling by the EU and uphold nearly $700 million in fines sparked an immediate negative reaction from Thomas Barnett, the Justice Department’s antitrust chief, who said it would have “the unfortunate consequence of harming consumers by chilling innovation and discouraging competition. … In the United States, antitrust laws are enforced to protect consumers by protecting competition, not competitors.”

Suffice it to say, Barnett’s “we don’t do that sort of thing over here” remarks did not go over well in the EU. In an unusually harsh response EU chief antitrust enforcer Kroes said: “It is totally unacceptable that a representative of the U.S. administration criticized an independent court of law outside its jurisdiction. The European Commission does not pass judgment on rulings by U.S. courts and we expect the same degree of respect.”