By Sam Schechner, Alistair Barr and Rolfe Winkler
The decision of European antitrust regulators Wednesday to hit
Google Inc. with formal charges of having broken competition rules
could lead to years of litigation, requirements that Google change
its business practices, and billions of euros in fines.
But an examination of the bloc's last big case against an
allegedly dominant consumer-tech firm-- Microsoft Corp.--shows that
the process may also have a lasting effect on a less tangible
target: the company's culture.
Nearly two decades of antitrust litigation had a big impact on
Microsoft, say people close to the company. From hiring legions of
lawyers to adopting a stringent process to green light and build
new products, legal compliance--and, some would say,
conservatism--has become baked into the Redmond, Wash., company's
DNA.
"Microsoft now has a very serious not only antitrust but just
general compliance mentality," said Thomas Vinje, an antitrust
lawyer who fought against Microsoft during the court case and now
works for a Microsoft-backed group that has been challenging
Google. "The company is changed in that regard."
Some people inside and outside Microsoft say that the change is
for the better, a sign that the company has become more mature and
accepts its legal obligations. Indeed, European officials rarely
complain about Microsoft, whereas Google and Facebook are often in
regulators' sights.
Others argue that the change has made Microsoft less
competitive. The decision to involve lawyers in the decision-making
process on what products to ship has not only slowed things down
but also made it difficult to launch integrated products that
customers might find useful, a former employee said.
While the details of the Microsoft and Google cases are
different--one was about media players and servers, while the other
is about a search engine and online ads--they remain anchored in
some of the same underlying complaints. In both cases, detractors
allege that the firms abused a dominant position to leverage their
own services over those of competitors.
On Tuesday, News Corp, publisher of The Wall Street Journal,
joined a group of companies that have formally filed a complaint
with the European Commission regarding Google's competition
practices, a News Corp spokesman said. He declined to disclose
further details.
Google executives have tried to learn from Microsoft's
experience, according to people familiar with the matter. The
company worked for nearly five years to hammer out a settlement
before the EU decided to charge it. Microsoft, by contrast, started
settlement after only four years and two volleys of formal
charges.
Google nevertheless has also started to see some of the same
internal changes in response to regulatory issues as Microsoft.
Around 2007, when antitrust issues began emerging in the U.S.,
lawyers got more involved in prerelease product decisions to avoid
antitrust complaints, according to people familiar with the
situation.
For instance, the company nixed an effort to start showing
search results from personal Gmail accounts when users were
searching the Web because lawyers worried about the potential
antitrust impact of tying the smaller email business to the
company's main search activity, one of the people said.
Today, "the amount of concern over [antitrust enforcement] is
enormous," said a person close to Google.
"There are certain things you know you can't do that other
companies can do," said Jean-François Bellis, a lawyer who
represented Microsoft against the EU. "When you have the label
'dominant position,' you now have a regulatory constituency that
you must appease whenever you have a new product."
To be sure, both Google and Microsoft continue to roll out new
products and services. Microsoft has invested in a voice-controlled
personal assistant called Cortana, and it has also shown off a new
HoloLens that allows users to interact with holographic images.
The Microsoft case began in 1998 when Sun Microsystems Inc.
first filed its interoperability complaint against the company. The
EU followed up with formal charges 18 months later that led to
tit-for tat responses and complaints as the bloc honed its
complaint, later adding allegations that Microsoft unfairly bundled
its media player with the Windows operating system.
In 2004, Microsoft thought it had sealed a settlement deal with
then antitrust chief Mario Monti, and Chief Executive Steve Ballmer
arrived in Brussels to help drive the case home. Instead, Mr. Monti
had Mr. Ballmer over for coffee and told him the deal was off and
the commission would officially find Microsoft in violation of the
law, according to people close to the company.
Feeling burned, Microsoft fought the decision in court, along
with subsequent fines and late fees. But by 2007, nearly a decade
after the inquiries first started, Microsoft lost an appeal of the
2004 decision. Rather than keep fighting in the courts, the company
decided to try to make peace. It withdrew its appeal and even when
fighting later fines took a much lower profile, lawyers said.
"At one point, you just say pay and move on," said Georg
Berrisch, an outside lawyer who worked for Microsoft on the case.
"It's very difficult for someone to always have the bad press. You
just want to move on."
Microsoft was fined a total of EUR2.2 billion ($2.33 billion) in
the EU between 2004 and 2013. In addition, it was forced to release
a special version of Windows and deliver thousands of pages of
internal specifications.
Some lawyers question whether the remedies the EU applied had
much effect on Microsoft itself. Very few people purchased the
special version of Windows. Moreover, the marketplace has moved on,
making requirements for Microsoft to offer competing Internet
browsers less important, given the rise of Google's Chrome
browser.
The cultural impact internally, however, may be long
lasting.
"They still think they were unfairly targeted," said Mr. Vinje.
"But they now get the fact that as a dominant company they have to
comply with the law."
Write to Sam Schechner at sam.schechner@wsj.com, Alistair Barr
at alistair.barr@wsj.com and Rolfe Winkler at
rolfe.winkler@wsj.com
Corrections & Amplifications
An earlier version of this article misspelled the last name of
lawyer Georg Berrisch.
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