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Microsoft Facing £25m Argentinian Linux Lawsuit

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Exclusive: A legal dispute between Microsoft and an open source company in Argentina raises questions about the availability of desktop Linux in other countries, experts claim

Microsoft is facing an ongoing legal challenge in Argentina from an open source company which alleges the software giant used its Windows Starter Edition to dominate the country’s operating system market.

Argentinian software company Pixart SRL launched the lawsuit in September 2008 but the possibility of the case being heard has become more likely in recent weeks, according to the company’s lawyer Dr Uriel Blustein of Estudio Blustein & Asociados.

“It is a suit filed in the ‘National commission for Fair Trading’, for an alleged abuse of dominant position,” Dr Blustein told eWEEK Europe in an email this week. “The Commission in is the process of deciding whether the trial will take place,” (i.e. whether there is enough evidence to justify an investigation).

Don’t cry for us Argentina, says Microsoft

Pixart alleges that the market share of its Debian-based Linux distribution, Rxart, has been undermined by uncompetitive pricing practices from Microsoft. In a document outlining its case against Microsoft, Pixart argues that the existence of PCs pre-installed with a cut-down version of Microsoft Windows XP, known as Microsoft Stater Edition, was effectively used to undercut machines loaded with Rxart.

“Microsoft decided in late 2007 to pursue a policy of aggressive pricing subsidies to try to recover the market economically and financially suffocating Pixart SRL, mainly through a version of the operating system called ‘starter edition’,” the document states.

Pixart claims to have had an installed base of around 320,000 units in 2005 but that base has been gradually eroded by the existence of Windows Starter Edition, and more recently Windows Vista Home Basic.

Microsoft states that Windows Starter Edition was developed in 2004 specifically for developing economies at the behest of government. “Windows XP Starter Edition began as a limited pilot program at the request of government partners and then grew into a product benefitting millions of first-time PC owners in 139 countries around the world,” the company states.

Commenting on the Pixart case, Microsoft’s director of Public Affairs, Kevin Kutz said: “We have responded to the complaint in the case, which is more than two years old and is still pending before Argentina’s National Antitrust Commission. We believe the complaint is baseless.  We offer Windows at competitive prices and the complainant, Pixart, is upset about this competition on the merits and wants an order that requires Microsoft to set its prices higher in order to help their sales.”

Erosion of Argentinian open source market

The Pixart court document also refers to the comments made by a leading Italian open source expert and academic Professor Roberto Di Cosmo, who has advised the French government on its progressive open source policies. Commenting on the case on his blog, Di Cosmo states that he sees the merits for Pixart’s legal action given the apparent erosion of a once healthy market for Linux-based notebooks and desktops in Argentina.

Roberto Di Cosmo
Roberto Di Cosmo

“About five years ago, I wrote a detailed report on how one could have the choice between GNU/Linux and other operating systems in Argentina that was most surprising for French people, that have always had the greatest difficulties in getting such a choice,” Di Cosmo wrote. “But starting from 2 years ago, I have seen that it has become impossible to find any longer a single machine with GNU / Linux in retail: worse, we saw some very dubious agreements negotiated under the high patronage of the founder of the multinational software company that monopolises the operating systems market.”

Di Cosmo’s blog contains a link to the Pixart court filing and alleges that the allegations against Microsoft made by Pixart may have been repeated in other countries. “Well, I happen to have in my hands right now a copy of the appeal filed against Microsoft by the little Argentine SMEs Pixart, and it is very helpful in understanding what really happened there … and very likely what is happening here [In France] too,” he says.

If the Argentinian Commission decides to hear the case, and finds against Microsoft, the software giant has the right to one appeal according to Blustein. “Microsoft can appeal the decision one level further, in case they are unhappy with the first judgement.”

  1. A large problem we have is interoperability. Microsoft keeps their source closed for a reason. It enables their monopoly position. Software is extremely complex and can be changed dynamically by Microsoft on the fly (so that their own software remains in sync but third party breaks). It is difficult to substitute their software out.

    Having developed their OS before FOSS was a threat, they can make their money tending to existing clients who find it challenging to exit or substitute Microsoft software (interoperability). Meanwhile, they give away their software as inexpensively as possible in new markets, and, in particular, targeted for maximum effect to nip Linux growth in the bud. It also helps they have a load of cash, connections, brand (they are the devil people know), and an ethically challenged management.

    I think the government and private sector can *demand* source code be made openly available (for privacy, security, and extra flexibility/value). Alternatively, the government might want to insist on standards and exact heavy penalties whenever it is found Microsoft has broken a standard or extended it in secret ways (obviously, Microsoft breaks and extends standards as a matter of course.. that is how they build up lock-in secrets).

    Without one of these two demands on Microsoft (and on closed source vendors in general, but in particular on Microsoft as the vendor of the main platform and key applications running on it), FOSS will have a more difficult time getting traction (it will grow, but there will be costs to be born by those trying to grow that market).

    I think the government can justify either of these free market moves on behalf of the public interest, even without having to go into antitrust actions (though it may very well be that Microsoft has broken laws, eg, dumping, illegal contract terms, etc).

    As for those trying to grow Linux market share, it obvious can be done. Perhaps the main reason for difficulties could be found in the contract terms with hardware OEMs and other Microsoft partners, but surely buyers should be more demanding (as I suggested above). This is especially true of the government as a representative of the people and with a need for transparency and the avoidance of creating monopolies by instilling lock-in at a wide scale through their support of closed source products.