South Korea Fines Microsoft $32 Million

UPDATED Less than a month after it reached a $30 million settlement with South Korean Internet portal Daum, Microsoft has been fined another $32 million by the country's Fair Trade Commission. The Korean FTC has also ordered Microsoft to unbundle its instant messaging client and media player from Windows, and link to competing software.

Daum and RealNetworks had previously complained to the country's antitrust watchdog in 2001 about the bundling. Although both companies have recently settled with Microsoft and dropped their claims, the KFTC said it would continue its investigation.

The commission has demanded that Microsoft offer two separate versions of Windows in South Korea. One version must be stripped of Windows Messenger and Windows Media Player, while the other must include links directing customers to competing software downloads as an option.

"The Korea Fair Trade Commission found such tying practices liable because they constitute abuse of market dominant position and unfair trade practices under monopoly regulations and the Fair Trade Act," the KFTC told reporters.

Microsoft has 180 days to comply with the order, which lasts for 10 years. After 5 years, Microsoft may appeal the decision once per year, depending on market conditions.

In a statement, Microsoft said the integration of IM and media player functionality "has created great value for consumers and opportunities for Korean developers," adding that the decision "could have the effect of chilling innovation in Korea."

Microsoft previously claimed in an SEC filing that if it were required to change Windows, it may "delay offering new versions in Korea" or withdraw the operating system entirely. However, the company now says it will not back away from the Korean market.

"We intend to appeal this decision because it is inconsistent with Korean law. Nevertheless, we will continue developing products for Korean consumers in a way that complies with all laws and is pro-competitive," Microsoft said. "We remain committed to Korea and look forward to continuing to serve the interests of Korean consumers as well as the rest of the Korean information technology industry."

Microsoft has already been forced to separate Windows Media Player from its operating system in Europe as part of a 497 million euro judgment in March 2004. The company released Windows XP 'N' in June of this year, but it is only available in Europe and demand has been minimal.