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Japan Plays Heavy Vs. Microsoft

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The surprise raid by Japanese anti-monopoly authorities' on Microsoft Corp.'s Tokyo offices was impeccably timed barely a month before the European Union slapped a $613 million fine on the company.

The message from this country's Fair Trade Commission was clear: Japan is not about to sit idle as other global powers raise concerns over Microsoft's suspected abuses of its domination in the computer software business.

But whether the Japanese investigation that triggered the commission's inspections of the software titan's Tokyo offices will amount to much more than symbolic posturing remains unclear, experts say.

"The Japanese Fair Trade Commission wants to demonstrate it's marching in lockstep with the other nations," said Tadaaki Mataga, a Gartner analyst who thinks anything more than a warning is unlikely.

The fair trade agency said a possibly restrictive clause in Microsoft contracts with hardware companies here was behind the raid. The language essentially barred Japanese companies that license Windows operating systems from any legal action against Microsoft over patent violations, commission and Microsoft officials say.

Microsoft has denied any wrongdoing. It claimed in a statement that the European Commission, the U.S. Department of Justice and American courts had reviewed the provision.

But shortly after the commission's Feb. 26 raid, the company said it had decided the previous week to delete the clause in future contracts — and had already told the manufacturers.

A Japanese government official, speaking on condition of anonymity, said the raid should be considered a pressure tactic.

The patent issue is especially critical for Japanese electronics makers as they develop smarter cell phones, network gadgets, digital appliances and other products that are supplanting desktop PCs as computing platforms, the official said.

There is concern that Microsoft, if allowed unfettered access to proprietary information about such companies' products, would be able to use it to its advantage and their detriment in the marketplace. It's feared Microsoft could gain even more muscle globally as broadband Internet boosts the trade in music, video and other digital content.

Beyond the fine it imposed, the EU ordered that Microsoft provide European computer manufacturers with a version of Windows stripped of the company's digital media player — and ordered it to share more information with rivals in the server market.

The monopoly watchdog in Japan rarely resorts to fines and a fine of the magnitude of the one imposed by the EU would be unthinkable here, though the raid was major news in Japan, topping headlines and TV news.

The government official consulted about the fair trade raid said Japan wants to see what Microsoft will do next — watching closely how thoroughly it will remove the contested clause — before it considers further action.

Toshiba Corp., Matsushita Electric Industrial Co., which makes the Panasonic brand, Sharp Corp. and other Japanese electronics makers refused to comment on the Microsoft probe, saying they were also being questioned by the fair trade agency about it.

As in the rest of the world, Windows controls virtually the entire PC software market here. And manufacturers are extremely nervous about saying anything that may damage relations with Microsoft — even as they wish to keep its prowess in check.

Microsoft Japan said that the investigation by the commission was continuing through meetings and requests for information and that Microsoft was cooperating with the probe.

Having modernized in the decades after World War II largely through government-orchestrated scenarios that favored major companies over the little players, Japan has never boasted a corporate culture that demands transparency or slams monopolistic behavior.

Yet Tokyo has lately grown somewhat wary of Microsoft's might, trying to push for open-source software such as Linux not only in government but also in private-sector research and product development.

Many of Japan's latest gadgets and robots use Linux, not Windows.

Japan's trade ministry has been promoting not only the use of Linux here but also collaboration with the governments of South Korea and China to share research findings and encouraging exchange among experts, an effort that is seen as going hand in hand with anti-monopoly pressures on Microsoft.

"Japanese makers are grateful that the powers above are acting," to keep Microsoft's might in check, says Kazuya Yamamoto, analyst at UFJ Tsubasa Securities Co. in Tokyo. "It's an expression of national policy that's beyond the reach of individual companies."

And the chances aren't great for Microsoft to repeat in network gadgets what it has done in personal computers, as Japanese makers decisively turn to Linux, Tron and other less expensive operating systems for their latest products, Yamamoto said.

Robots and cell phones are among new Japanese gadgets that already run on Linux and Tron and more products are in the pipeline, companies say

"Behind the commission's investigation is the agenda from the Japanese makers determined not to have their hands tied when they try to develop network consumer gadgets," the Nihon Keizai Shimbun, Japan's top business daily, said in an editorial following the EU ruling.

"If we hope to make various technologies work successfully together, it's precisely Microsoft that must be more open with its own technologies," it said.