AFP reports:

China has begun an anti-monopoly investigation into US software giant Microsoft and lawsuits by local companies could follow, state media reported on Wednesday.

China’s State Intellectual Property Office and some research institutions have targeted Microsoft and several other global software firms over suspected monopoly activities, the Shanghai Securities News said.

Firms will be organised to file lawsuits against the software giants after China’s debut anti-monopoly law comes into effect on August 1, unnamed sources told the newspaper.

The probe by Chinese regulators focuses on operating systems and other software developed by international companies that cost much more in China than in the US, one source was quoted as saying.

“On the one hand, global software firms, taking advantage of their monopoly position, set unreasonably high prices for genuine software while on the other hand, they criticise Chinese for poor copyright awareness. This is abnormal.”

The point is that fully licensed copies of a Windows operating system and Office can cost more than the actual computer. When the law was written, China Daily had this to say:

The law, with eight chapters and 57 provisions, also bans monopolistic arrangements, such as cartels and other forms of collusion, and provides for the investigation and prosecution of monopolistic practices, while protecting monopolistic arrangements that promote innovation and technological advancement.

It prohibits monopolies from using their dominant status in the market to curb competition, fix prices, enforce package sales, and refuse or enforce trade.

I have no idea how this will shake out. Microsoft’s more memorable anti-competitive lawsuits have come from the EU and US governments. Both were focused on Microsoft’s possibly anti-competitive practice of bundling new applications as operating system features in Windows.

Armchair conspiracy theorists are already tying the rumor to Microsoft’s many intellectual property battles in China. However, all that cooled down years ago - largely due to the efforts of Microsoft China’s former president, Tim Chen. Microsoft’s once-adversarial approach shifted to cooperation and investment. In what many saw as a reward, a law was passed in 2006 (I think) requiring that all computers sold in China have a licensed operating system installed.

There’s no doubt that Microsoft’s dominance of the China market allows it to set its own prices, but it should be noted that they also cut prices to spur sales. They did it with Vista.

Microsoft faces no real competition domestically or internationally for its operating system and office suite (at least for the nearish future). No matter what happens with a possible suit, there will not be a rush to adopt Red Flag Linux.

China finds price controls quite normal - mostly to fight inflation or as a subsidy. Maybe this possible Microsoft suit is just a new way to iron out an abnormal wrinkle.

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