On Thursday morning, European Union regulators announced the launch of an antitrust probe into U.S. software maker Oracle's (NASDAQ: ORCL) takeover of Sun Microsystems. The regulatory group believes that the deal could lead to higher prices and limited choice for database software. Approval from this group is considered the main stumbling block for the deal, which has cleared the Department of Justice in the United States.

The final decision has a deadline of 90 days, or January 19, 2009. By this date, the European Commission can decide to clear or to block the deal. More often than not, the Commission will force companies to make changes that would eliminate any concerns over antitrust regulations.

MAJOR PAPERS:

• According to people familiar with the matter, Yahoo! Inc (NASDAQ: YHOO) has stepped up talks with Time Warner Inc (NYSE: TWX) to possibly create an alternative to the unsolicited bid Microsoft Corporation (NASDAQ: MSFT) made for Yahoo!, the Wall Street Journal reported. Though a Microsoft acquisition of Yahoo! is considered the "most likely outcome," Yahoo! and Time Warner have been in talks to incorporate the AOL Internet unit into Yahoo!
• The Financial Times reported that the European Commission is probing the process under which an important Microsoft document format could be adopted as an industry standard, according to The Financial Times. This move would carry substantial commercial benefits for the company.
• The Financial Times also reported that Amazon.com Inc (NASDAQ: AMZN) will start selling wine in the U.S. in an effort to enlarge its expanding non-perishable groceries business.

WEB SITES:

• According to the chairman of parent group CITIC Group, Kong Dan, Reuters reported that CITIC Securities is in talks to acquire a larger stake in The Bear Stearns Companies (NYSE: BSC) in order to reflect the drop in shares of the broker.

The European Commission has launched a new antitrust investigation against software giant Microsoft, alleging that the company abused its market dominance, Reuters reported.

Following complaints by Norway-based Web browser company Opera, and a coalition of technology companies, the EU will inquire as to whether Microsoft (NASDAQ: MSFT) broke EU competition rules to help its Web browser and its Office / Outlook products.

Microsoft's a focus, again

The inquiry comes four months after Microsoft lost its Europe appeal of a case in which officials ruled that the company had illegally tied its Media Player to the Windows operating system and had failed to disclose information that would make other server software company's products operate on the Windows system, the Financial Times reported Tuesday.

I'll bet you never thought you would hear Microsoft invoke shoe laces in its argument to defend its bundling of Media Player with its operating system, as it appeals the EU's anti-trust ruling.  Yesterday was the first day of a five-day hearing before the Court of First Instance in Luxembourg.

In defending its decision to bundle Media Player with its operating system, UK's The Independent reported that Microsoft's attorney told the court, "One has to consider whether there is a demand for shoes without laces.  Since customers want to buy shoes with laces it has become commercial practice, therefore it is not tying."

The European Commission's representative didn't buy that analogy.  According to The Independent, he told the court that Microsoft's bundling was "more like one in which shoemakers obliged consumers to buy laces from them."

Shoe laces, of course, are not the real issue here.  The real question is whether Microsoft's bundling of Media Player stifled competition from other software offerings, such as Real Player.  The European Commission's representative described Windows as a "virtual monopoly" and claimed Microsoft is driving rivals out of the market and having a "chilling effect" on innovation, according to The Independent.

Wish I could be in the court room in Luxembourg listening to the arguments this week, but I'll have to depend on the European press for that front seat coverage.

Vista's release could be delayed if things don't go well in court next week for Microsoft as it appeals the European Union's antitrust ruling.  In fact, European Competition Commissioner Neelie Kroes already let Steve Ballmer know that the commission has concerns about the new operating system.  

EU commissioners are concerned that Vista may package Internet search functions or software to create fixed documents that pose a threat to Google or Adobe, which provide similar products.  If Microsoft fails next week, it could face more lawsuits, analysts fear.  Some analysts believe more government agencies may file suit as well, if the EU is successful.

One analyst at Jupiter Research, Joe Wilcox, is taking an optimistic position, according to Reuters.  He thinks Microsoft will settle with the EU to smooth the release of Vista in Europe.  If Microsoft does, that will certainly reduce the chances of additional lawsuits.  Vista is scheduled for release in January 2007.

As it stands now there is no sign of a settlement.  Microsoft will face a European appeals court next Monday to reverse the EU's 2004 antitrust finding.  In 2001 a U.S. court found that Microsoft violated antitrust laws, but that case was settled.  Microsoft also is appealing similar charges in South Korea and facing some trouble with regulators in Japan.

Microsoft struck out in court again.  A third federal judge denied it access to documents related to its case pending before the European Commission.  U.S District Court Judge Colleen McMahon refused to grant Microsoft access to IBM documents.  She said that Microsoft's subpoena was an attempt to undermine European law enforcement.  If Microsoft had been successful, she said it would harm other companies.

This is now strike three for Microsoft and it's out of options.  Federal judges in California and Boston also refused Microsoft access to documents from Novell, Sun Microsystems and Oracle previously. 

Microsoft now must focus its efforts on its appeal of the European Commission's 2004 anti-trust ruling.  If it loses its appeal before EU's second highest court next week, it may face fines of $2.4 million per day.

Boston district court judge Mark Wolf denied Microsoft the right to see documents that Novell presented to the European Commission regarding its anti-trust case. He thought Microsoft was trying to "circumvent and undermine" European law with its request.

If Microsoft loses its appeal of the 2004 ruling before EU's second highest court next week, it may face fines of up to $2.4 million per day.  In 2004, the EU ordered Microsoft to provide its rivals with the necessary code and other information needed to make their software compatible with Microsoft servers. It also ruled that Microsoft abused its dominant market position. Daily fines could be imposed by the EU if it finds next week that Microsoft is still dragging its feet.

Wolf was not the first judge to deny Microsoft's request for documents. A California judge turned down similar requests for documents from Oracle and Sun Microsystems last month. A New York judge is still considering a similar request for IBM documents.