China accuses Microsoft of failing to disclose information

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Paul Carsten Beijing

A CHINESE regulator was conducting an anti-monopoly investigation into Microsoft because the firm had not fully disclosed information about its Windows operating system and Microsoft Office software, the watchdog said yesterday.

The State Administration for Industry and Commerce (SAIC) said it was investigating a Microsoft vice-president and senior managers, and had made copies of the firm’s financial statements and contracts.

Microsoft is one of the biggest US firms to fall under the eye of Chinese regulators as they ramp up their oversight in an apparent attempt to protect local firms and customers. The watchdog said it had obtained documents, e-mails and other data from Microsoft’s computers and servers, adding that it could not complete the investigation as Microsoft had said some of its key personnel were not in China.

The statement said the US company had been suspected of violating China’s anti-monopoly law since June last year in relation to problems with compatibility, bundling and document authentication.

The announcement from the SAIC, one of three antitrust regulators in China, came a day after officials from the agency raided Microsoft offices in Beijing, Shanghai, Guangzhou and Chengdu.

Microsoft said on Monday that it had been visited by officials and the company was “happy to answer the government’s questions”, a statement it repeated after the announcement from the regulator yesterday.

A Chinese law firm, which declined to be identified, said Microsoft had already engaged it to help with the anti-monopoly case.

Microsoft has a wide range of operations in China, including research and development and teams for products such as Windows, the Office suite of business software, servers, entertainment and hardware.

But its revenues from the country, which Microsoft does not break out in its earnings statements, are very low. The disappointing sales in a market of 1.4 billion people, where piracy is rampant, had led to strained relations with Microsoft’s headquarters in Redmond, Washington, a former employee said.

Former chief executive Steve Ballmer reportedly told staff in 2011 that, because of piracy, Microsoft earned less revenue in China than in the Netherlands, even though computer sales matched those of the US.

Earlier this month, activists said Microsoft’s OneDrive cloud storage service was being disrupted in China. In May, central government offices were banned from installing Windows 8 on new computers.

US-China business relations have been severely strained by wrangles over data privacy and industrial espionage. – Reuters


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