China probes Microsoft over anti-monopoly issues and suspicion of anti-competitive behavior

Chinese government raided Microsoft offices over antimonopoly issues

On July 28th, four of Microsoft offices in China were raided by China's State Administration for Industry and Commerce. At that moment, we weren’t sure about the nature of this sudden inspection, however, new information has surfaced since.

The inspection by the Chinese authority was to check whether Microsoft broke anti-monopoly laws. We are now learning that around 100 investigators made their way into Microsoft’s offices in Beijing, Shanghai, Chengdu, and Guangzhou.

These investigators took possession of two computers, emails, and other documents and internal correspondence. The cause of this investigation was from security complaints about Microsoft’s Windows operating system and Office productivity suite.

In a statement, the agency said that it received complaints from several businesses regarding the security features of the said Microsoft products. Also, Microsoft had reportedly not clarified how it bundled products together. The complaints were first filed in June 2013.

"The SAIC [State Administration for Industry & Commerce] believes the results from an earlier inspection aren't enough to clear Microsoft of suspicion of anti-competitive behavior," it said.

"results from an earlier inspection aren't enough to clear Microsoft of suspicion of anti-competitive behavior"

The agency interviewed Microsoft executives and employees, but not all the Microsoft officials were available at the offices. The agency also copied contracts and financial statements as part of the investigation. "The SAIC urges relevant staffers to come to the bureau for interviews as soon as possible," it said.

“[Microsoft] complies with the laws and regulations of every market in which we operate around the world and we have industry leading monitoring and enforcement mechanisms in place to ensure this. Our business practices in China are designed to be compliant with Chinese law,” a Microsoft spokesperson said in a statement.

China is concerned about its security and is under the impression that US technology companies are spying on it using their products and services. "There's a digital Cold War going on between the U.S. and China," said Alvin Kwock, an analyst with J.P. Morgan.

Chinese authority recently banned the use of Windows 8 operating system citing security concerns. The government has been promoting its homegrown products, and wants people to use those suites instead. “The Chinese government has spent a lot of time and effort promoting and getting Chinese companies into the tech industry,” said Jim McGregor, an analyst at Tirias Research. “The motivation is clear: They want Chinese companies to excel in China and overseas”.

However, Microsoft could rebound from this situation. Unlike the majority of US companies, the Redmond-based giant has more growth and better relations with the local authority. "It was the first multinational company to launch a public cloud in China, and that shows some government support behind it," he said, adding, "I think they may be able to work it out."

Since this is a criminal matter under Chinese law, if Microsoft is found guilty of this supposed anti-monopoly behavior, the software giant could face steep fines as well as various sanctions.

Not as severe as this case, but back in April of this year, the US Supreme Court had finally ended an antitrust lawsuit between Novell and Microsoft. The lawsuit cited Microsoft's alleged predatory behavior towards the WordPerfect productivity suite back in the 1990s. This case was notorious for having co-founder Bill Gates on the stand testifying for two days.