Singhania & Partners had complained to the anti-trust regulator in August 2010 that Microsoft offered lower prices of its software to original equipment manufacturers (OEM) than it did in volume licensing to the law firm or other businesses, which were forced to buy the volume licenses that were overpriced.

Singhania & Partners CEO Manju Mohotra told Legally India today that the firm would be appealing the judgment in the Competition Appeals Tribunal (COMPAT).

Amarchand Mangaldas Delhi competition law team represented Microsoft but declined to comment when contacted by Legally India.

It is understood that Singhania & Partners was initially represented by Delhi-based law firm Seth Dua & Associates with Singhania representing itself later on.

The substance

According to Singhania & Partners complaint, Microsoft’s licensing policy of differential licensing rates amounted to a monopolistic practice which was being used to control the software distribution network.

But the CCI ruled in its decision dated 30 June that the differential pricing, which the company had adopted globally in respect of various categories of licenses, failed to raise any competition issue in the absence of substantial evidence, as first reported by Real Time News.

Furthermore the CCI held that there was no material indication that because of Microsoft’s dominant position in the operating systems and its agreement with the OEM manufacturers competitors were driven out of the market.

The regulator agreed with Microsoft’ arguments that whole sale rates discounts in royalty rates offered to OEM were justified.

The OEM and volume licenses’ cost differed also due to support functions such as installation, warrantee, activation, updates services provided by OEMs as against those undertaken under volumes license sales by institutions.

Microsoft also maintained that the distributors were independent of the company and had the option of distributing non-Microsoft software on PCs, as 30 per cent of PCs sold by OEM’s in India had Microsoft’s Windows operating system preinstalled but less than 1 per cent of PCs had licensed Microsoft Office software installed.

The majority order passed under section 19(1)(a) of the Competition Act 2002 prima facie held that the complaint was not fit for a director general inquiry even though one CCI member R Prasad gave a dissenting opinion.

Dissent

Prasad in his dissenting opinion held that the director general should investigate further although the “information provided by the information providers is limited”. Microsoft held an 80 per cent market share in the operating systems (OS) market, and although there were other competitors such as Apple, Goold and Linux, that “appears to be marginal competition as their combined market share is only 10 per cent” and that there was “strong possibility” that Microsoft was a dominant player.

He added that because Microsoft charged up to three times as much for software not purchased with a new PC, which “appears an attempt to exploit its monopoly in the software market by exploiting one segment of buyers. This practice can be seen as unfair and discriminatory in view of the Act” said Prasad.

Prasad also added that Microsoft was trying to protect its operating system (OS) market by making the “software packages compatible only with windows Operating system of Microsoft (sic). The blocking of interoperability with other OS can be considered as abuse of its dominance as prohibited under the Act”.

Furthermore, he noted that the “vertical agreement between Microsoft and the OEMs is a mutually beneficial deal, whereby they support each other to expand business and hinders competition in the relevant market”.

Prasad also claimed that in the states of Iowa and California in the US, Microsoft was ordered to refund the difference in price to volume licensees because the software maker had abused its monopoly position.

According to CNET an Iowa class action against Microsoft was settled with Microsoft agreeing to give partial refunds.

• Download the CCI Microsoft majority order here.
• Download the dissenting CCI Microsoft opinion here.