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Microsoft inspected in Japan

The Fair Trade Commission of Japan conducts an inspection at Microsoft's Tokyo subsidiary to review the software giant's business documents.

As Microsoft lawyers tossed and turned last night in advance of today's hearing with the Department of Justice, the software giant suffered another antitrust blow as the Fair Trade Commission of Japan conducted a morning raid on the company's Tokyo offices.

The inspection by the FTCJ is the latest in a string of antitrust headaches for Microsoft, which in addition to being the target of actions by American and Japanese government agencies has faced investigations by the European Union and the government of South Korea.

Like the other investigations, the FTCJ's probe concerns the distribution of Microsoft's Internet Explorer Web browsing software. In this case, however, the focus is on the company's decision to bundle Word, its word-processing software, with Excel, its spreadsheet software. Microsoft made the bundling offer to original equipment manufacturers as a challenge to a similar package offered by Justsystem, Japan's leading software provider.

An FTCJ representative who asked not to be named said that Microsoft was suspected of forcing Japanese computer makers to install both Word and Excel, and of prohibiting the installation of any products competitive with Word and Excel. The representative also said that Microsoft allegedly forced computer makers not to install Netscape Navigator.

"Microsoft is suspected to have violated section 19 of the Japanese antitrust act," said the FTCJ representative. "This is just a starting point. The FTC is just collecting evidence about the violation of Microsoft, and from now on will review the evidence that it has collected and will decide if Microsoft violated Japanese antitrust law or not."

Attorneys familiar with Japanese antitrust law said the dawn raid on Microsoft was indicative of an protectionist trade policy by the Japanese government.

"It's a classic Japanese government move of 'let's try to protect our guy--no matter what the cost to our own people--from competition abroad,'" said Jeff Zuckerman of international law firm Curtis, Mallet-Prevost, Colt, and Mosle.

"There may be some concern that U.S. companies are more frequently the targets of investigations in light of...the relatively modest role and market share of those companies," said Jim Atwood of the Washington, D.C.-based law firm Covington & Burling. "Microsoft is not a dominant company in Japan. It's a fair question why U.S. companies seem to be the targets of investigations as frequently as they are."

The FTCJ representative strenuously refuted charges of selective enforcement.

"I cannot agree with that idea at all," he said. "The FTC is equally enforcing law against Japanese and other foreign companies."

Microsoft associate general counsel Brad Smith promised full cooperation with the investigation, which he said was tied to Microsoft's competitive challenge to Justsystem.

"We've seen Microsoft doing somewhat better in the word-processing market against a longtime market leader," said Smith. "It was the clear focus of the FTCJ's review today to examine any document that pertained to the competition between Microsoft and Justsystem."

The FTCJ publicly announced the investigation in October. At that time Microsoft contacted the agency and volunteered to provide whatever information was required, Smith said, adding that the FTCJ did not respond to that offer until this morning's surprise raid.

Smith said that a FTCJ decision against Microsoft most likely would result in a request that the software company alter its business practices in Japan, rather than any kind of fine.

Microsoft currently is facing an investigation by the European Commission over its contracts with Internet service providers and the distribution of Internet Explorer.

Additionally, Korea's trade commission, in an investigation that Smith described as "very preliminary," has requested information regarding the integration of Windows 98 and Internet Explorer. Microsoft has complied with that request, and there has been no further action, Smith said.

Smith said that the four investigations pending against Microsoft were not draining a significant amount of company resources. He said that antitrust actions were the inevitable result of being a successful American company in a global economy, but also suggested that the Justice Department action may have inspired copycat investigations overseas.

"When Justice starts asking questions in the United States," he said, "it's not surprising that foreign governments are going to take the opportunity to do the same thing."