China Investigates Microsoft for Possible Antitrust Issues

By Joe Rizzo July 30, 2014

It seems that once again Microsoft is under examination in China. The Chinese government is investigating possible violations to its antitrust laws. The State Administration for Industry and Commerce, or SAIC as it is commonly referred to, is the authority in the People's Republic of China responsible for legislation concerning the administration of industry and commerce in China. It is the body responsible for enforcing business laws.

This week, the SAIC opened an anti-monopoly investigation against Microsoft. As of today, these are still just allegations, as the investigation continues. This announcement was made after officials from the SAIC visited some of Microsoft's local offices. Actually, a source familiar with the matter, said some Microsoft offices in China have been raided as part of the investigation.

The Microsoft offices in question are located in Beijing, Shanghai, Guangzhou and Chengdu. The Chinese government is also investigating Microsoft executives, including a vice president. The regulator urged Microsoft to cooperate after almost 100 SAIC staff inspected the offices yesterday, copying contracts and financial statements.

This was acknowledged earlier this week by Microsoft in an e-mail. It was followed by a statement yesterday that it “complies with the laws and regulations of every market in which we operate around the world and we have industry leading monitoring and enforcement mechanisms in place to ensure this. Our business practices in China are designed to be compliant with Chinese law.”

In a statement by the SAIC, the reason given for the investigation is that Microsoft had not disclosed relevant information about some security features and how it ties its software products together. The statement wasn't more specific. A Microsoft spokesperson responded by saying, "We aim to build products that deliver the features, security and reliability customers expect and we will address any concerns the government may have."

Is this actually part of a bigger picture? It seems that China has stepped up the pressure that it is putting on U.S. companies. This comes after American prosecutors indicted five Chinese military officers this past May for allegedly stealing corporate secrets. In return, China has criticized Microsoft, Google and Apple for allegedly cooperating with a U.S. spying program. Qualcomm has also come under SAIC investigation for violating anti-monopoly laws.

A source, who wanted to remain anonymous disclosed that Microsoft and the SAIC had been discussing the SAIC’s concerns and the company considered the talks productive. Microsoft was therefore surprised by the investigation.

One problem that arose in May for Microsoft was the fact that Windows 8 has been banned from being put on all new government computers. According to the state run Xinhua News Agency, Windows 8 was excluded from a government purchasing order of energy efficient computers. Part of the reason given had to do with concerns over Internet safety.

In a statement earlier this year, the U.S. Chamber of Commerce said "It has become increasingly clear that the Chinese government has seized on using the [anti-monopoly] law to promote Chinese producer welfare and to advance industrial policies that nurture domestic enterprises."

A spokesman for the Chinese embassy in Washington, D.C. made the following comment, "We welcome foreign enterprises including U.S. companies to invest and do business in China and will continue to create an enabling environment for their operations in China. We hope that the U.S. companies will abide by Chinese laws and regulations."

TechZone360 Contributing Writer

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