Microsoft complies with Korea fair trade ruling

Microsoft will release two versions of Windows XP in South Korea on Thursday to comply with a ruling that it violated the country's fair trade practices.

The release will meet a deadline set by the Korea Fair Trade Commission (KFTC), which fined Microsoft 33 billion won in December 2005 ($32 million at the time of the penalty). Microsoft paid the fine in May, said Hwang Yun-hwan, a KFTC official.

The South Korean regulators found that Microsoft had abused its dominance in the operating systems market by bundling its media player and instant messaging software with Windows. It set a deadline of Aug. 24 for Microsoft to offer two versions of the OS.

Microsoft will now offer two versions of both the Home and Professional editions of Windows XP for the Korean market, said Microsoft spokesman Oliver Roll.

A "K" version includes the Windows Messenger and Windows Media Player software, along with links to Web sites of companies that offer competing products. A version dubbed "KN" will come without the Messenger and Media Player applications, Roll said.

PC makers will receive both versions of the OS on Thursday, he said. Those manufacturers will decide when the products will be available for sale.

The requirement echoes a similar measure imposed by European regulators about two years ago after they too found Microsoft guilty of harming competition. Microsoft was ordered to offer a second version of Windows in Europe without its media player software. It was also ordered to release certain server OS protocols and fined €497 million ($613 million at the time).

The company released the second version of Windows in Europe but few PC makers said they planned to offer it, raising questions about the effectiveness of the remedy. PC makers cited the expense of testing and supporting a second version of the OS, and said it was unclear whether people would want to buy it.

Korea's investigation of Microsoft came after two rivals filed complaints against it with the KFTC.

Daum Communications, a Korean company with a popular Web portal, said in 2001 that Microsoft's inclusion of Messenger with its OS harmed Daum's business and caused it unspecified damages. Three years later, RealNetworks, the developer of the RealPlayer media program, complained about Microsoft's combination of its Windows Media Player and Media Server programs.

Microsoft later settled with both companies. Daum received a package worth $30 million in November 2005. A month later, RealNetworks struck a deal worth $761 million to settle its legal complaints in Korea and elsewhere. The KFTC continued its investigation, however.

Microsoft is appealing the Korean decision with the High Court in Seoul. Last month, the High Court rejected Microsoft's request to postpone the penalties pending the outcome of that appeal.

"We hope at the end of that process the High Court rules in our favor," Roll said. "At the end of the day, we think it's good for Korean consumers to have new, improved features added to our products."

(Moon Hyun-joo in London contributed to this report.)