Microsoft settles with Daum for $30M

Microsoft moved a step closer to clearing up its legal problems in South Korea on Friday when local Internet portal operator Daum Communications agreed to accept a package worth $30 million from Microsoft in settlement of its antitrust complaints, the two companies said Friday.

However, the agreement won't necessarily end an investigation into Microsoft by Korea’s Fair Trade Commission (KFTC) that began in April 2004.

“It is significant that we have reached this settlement with Microsoft on terms that we believe are favorable to Daum, and to be able to work together with Microsoft to build a new business partnership,” said Daum vice Chief Executive Officer Kim Hyun-Young in a statement.

“This agreement marks not only the end of our legal dispute, but more importantly, the beginning of a closer working relationship between our companies,” said Tom Burt, corporate vice president and deputy general counsel for Microsoft, in the same statement.

Microsoft’s settlement with Daum, a Seoul-based portal operator with 55 million users worldwide, involves a $10 million cash payment, an advertising contract valued at $10 million and a further package of measures valued at $10 million including “marketing and promotional opportunities between the two companies,” the two companies said.

However, the actual terms of the third part of the package remain unclear. “What we’ve agreed is to run some selected online content from Daum on MSN,” said Oliver Roll, a Microsoft spokesman in Singapore. “We have no more details at this stage.”

The dispute dates back to 2001 when Daum filed a complaint with the KFTC over Microsoft’s bundling of Windows Messenger with the Windows operating system. Daum operates its own instant messenger platform in South Korea that competes with Microsoft's product. This was followed by the filing of a lawsuit against Microsoft in 2004. Both the suit and the anti-trust complaint are resolved by Friday's deal.

However, the KFTC launched a probe of Microsoft on its own initiative in April, 2004.

After this had begun, RealNetworks filed a complaint with the commission on Oct. 28, 2004, alleging that Microsoft damaged other software producers by bundling audio and video software with Windows. Last month, Microsoft reached an out-of-court settlement with RealNetworks, paying $761 million.

Asked whether anti-trust penalties could still be levied in the case, Lee Hwang, head of the Microsoft Task Force at the KFTC, said “Yes. It is totally up to the commission.”

Lee said that although both the Daum and the RealNetworks complaints have been resolved, the KFTC is pursuing two investigations into the bundling of Windows server operating system with Windows Media streaming service and the Windows PC operating system with Windows media player.

He did not specify when a judgment would be reached.

“We are continuing to cooperate with the commissioners,” said Roll. “We are expecting a decision in the next few weeks.”

Roll added that Microsoft was committed to Korea, “one of the most vibrant markets in Asia.”