If Microsoft thinks it's got an EU headache now, just wait

I can understand why Steve Ballmer may be wondering if he'll ever catch a break from Neelie Kroes.

Europe's top regulator again stuck it to Microsoft--this time it was a $1.3 billion penalty for noncompliance with previous regulatory decisions. So far, Microsoft has paid more than $2 billion in fines to the EU. A billion here, a billion there--Everett Dirkson, where have you gone?

And no matter how much Ballmer coos about turning the page and being a good corporate citizen, the Old World's regulatory mandarins still distrust Microsoft. Take a listen to the recording of Kroes' news conference. At one point it sounds as if she's talking about her experience with a used car salesman.

"I can remember four times when, if you were naïve, you could have thought everything was fixed. This didn't seem to be the reality. They have to deliver and implement."

You have to wonder whether the EU also plans to erect a roadblock in the way of a Microsoft-Yahoo merger--that is, of course, assuming Microsoft ever clinches a deal. What's clear is that Microsoft's burden of proof is going to be substantially higher on the other side of the Atlantic than it will be in Washington. The perception that the EU and the U.S. have divergent philosophies when it comes to antitrust policy is close to the reality. I should hasten to add that not everyone shares that view. In fact, Kroes' predecessor, Mario Monti, argues just the opposite:

"A single, but highly publicized case of divergence, has contributed to spread this perception. But if you look at the record, you will find that nothing could be further from the truth. Put simply, the EU and U.S. agree on what competition policy should be all about. We share a common fundamental vision of the role and limitations of public intervention. We both agree that the ultimate purpose of our respective intervention in the market-place should be to ensure that consumer welfare is not harmed."

"Some of that may be media exaggeration but there also is substance to the depiction. In general, European antitrust law focuses more heavily on monopolists' effects on competing businesses rather than on consumers."

We'll see.

When Microsoft last week announced changes designed to guarantee better technological interoperability with rivals' products, the EU responded tersely and, well, rather coldly. Ballmer extended an olive branch, hoping that the Europeans might interpret the move as a sign Microsoft was ready to be more open and yes, play by the rules. Kroes' office was unmoved.

By now, Brad Smith, who directs Microsoft's legal strategy, probably could write a book on the differences between European and U.S. trustbusters. On the other side of the pond, the prime concern is to maintain viable competition and Europe's antitrust focus cares more about any monopolistic effects on rival businesses, rather than on consumers.

And they're not afraid to hold up a big red stop sign. In 2001, U.S. regulators signed off on General Electric's proposed merger with Honeywell International. The EU's Competition Bureau, then run by Monti, nixed the deal. He said the combination would have reduced competition in the aerospace industry and resulted in higher prices for customers, particularly airlines.

That does not mean Microsoft's pursuit of Yahoo is bound to come a cropper once Kroes' team gets a chance to review any such deal. In an interview with my colleague Ina Fried on Tuesday, Ballmer was noncommittal: "I think regulators will look at that in all appropriate jurisdictions and I'm sure they'll give us a fair shake in all appropriate jurisdictions."

Considering Microsoft's fractious history with the EU, can Microsoft's CEO safely bet on this being a sure thing? I wouldn't take that bet.