Microsoft targeted in apparent Chinese anti-trust probe

BEIJING Tue Jul 29, 2014 9:01am IST

The Microsoft logo is seen at their offices in Bucharest March 20, 2013.    REUTERS/Bogdan Cristel/Files

The Microsoft logo is seen at their offices in Bucharest March 20, 2013.

Credit: Reuters/Bogdan Cristel/Files

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BEIJING (Reuters) - Microsoft Corp appears to be the latest U.S. company targeted by China for anti-trust investigation after government officials paid sudden visits to the software firm's Chinese offices on Monday.

Representatives from China's State Administration for Industry & Commerce (SAIC) made the visits to Microsoft offices in Beijing, Shanghai, Guangzhou and Chengdu, according to local media reports that were confirmed by Microsoft.

The Chinese government agency, which is in charge of market supervision and regulation and usually takes the lead in bribery and corruption investigations as well as intellectual property rights abuse cases, declined to comment on the visits.

A Microsoft spokeswoman said the company was "happy to answer the government's questions", but declined to give any further information.

A source close to the company said the visits were most likely the preliminary stage of an anti-trust investigation.

If that is the case, Microsoft would be one of the biggest U.S. companies to fall under the eye of Chinese regulators as they ramp up their oversight in an apparent attempt to protect local companies and customers.

Qualcomm Inc, the world's biggest cellphone chip maker, is facing penalties that may exceed $1 billion in one such Chinese anti-trust probe, following accusations of overcharging and abusing its market position.

China has other anti-trust regulators. The National Development and Reform Commission is mainly responsible for anti-trust violations related to pricing, while the Ministry of Commerce vets mergers and acquisitions.

Last year, officials from SAIC visited large international drug manufacturers in China including AstraZeneca Plc and Sanofi SA, as part of a broad investigation into the sector. SAIC officials also visited the Hangzhou office of Roche Holding AG earlier this year.

Beijing's increasing use of its 6-year-old anti-monopoly law and price competition rules to weigh-in on global mergers has riled U.S. companies and strained U.S.-China business relations.

The U.S. Chamber of Commerce earlier this year urged Washington to get tough with Beijing on its use of anti-competition rules, noting that "concerns among U.S. companies are intensifying".

U.S.-China business relations have been severely strained recently by wrangles over data privacy. State media have called for "severe punishment" against tech firms for helping the U.S government to steal secrets and monitor China, in the wake of revelations by former U.S. National Security Agency contractor Edward Snowden..

Tensions increased in May when the U.S. Justice Department charged five members of the Chinese military with hacking the systems of U.S. companies to steal trade secrets.

The latest move by China's authorities caps a rocky period for Microsoft in the country. 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, Microsoft's latest operating system, on new computers. This ban appears to not have been lifted, as multiple procurement notices since then have not allowed Windows 8.

Nevertheless, the company has pushed forward with plans to release its Xbox One gaming console in China in September, forming distribution ties with wireless carrier China Telecom Corp and e-commerce company JD.com Inc.

Microsoft shares fell 1.2 percent on Monday, underperforming a 0.1 percent decline for the Nasdaq Composite index.

(Reporting by Paul Carsten in Beijing, Bill Rigby in Seattle and Kazunori Takada in Shanghai; Editing by Matt Driskill, David Holmes, Richard Chang and Alex Richardson)

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