The European Commission's order that Microsoft ship a version of its OS sans Windows Media Player could "stifle innovation," according to the Bush administration's US Department of Justice (DOJ).

Ironically, the decision – which aims to level the skewed playing field between Microsoft and rivals in the digital media space – is criticized for potentially "helping Microsoft's rivals instead of promoting fair competition", again according to the DOJ.

Assistant Attorney General Hewitt Pate in a statement said the record €497.2 million fine levied against Microsoft by the European Commission (EC) is "unfortunate." It surpasses fines the Commission has imposed on price-fixing cartels and that may send the wrong message about antitrust-enforcement priorities, Pate said.

The US government fought its own antitrust battle with Microsoft, a case that was filed in 1998 and settled in 2002. Although the government proposed a breakup of Microsoft, it never proposed that Microsoft remove any part of Windows and for a reason, Pate said.

"Imposing antitrust liability on the basis of product enhancements and imposing 'code removal' remedies may produce unintended consequences," Pate said. "Sound antitrust policy must avoid chilling innovation and competition even by 'dominant' companies. A contrary approach risks protecting competitors, not competition, in ways that may ultimately harm innovation and the consumers that benefit from it."

The US settlement with Microsoft provides "clear and effective protection" for competition and consumers by preventing misconduct by Microsoft that would inhibit competition in the area of middleware applications such as the Web browser and the media player, Pate said.

US settlement 'too soft'

Not all the US states involved in that litigation or industry groups that were also involved in the US antitrust suit agree with the DOJ assessment. Critics castigated the eventual settlement as being "too soft".

Despite this, the DOJ chief said: "The US experience tells us that the best antitrust remedies eliminate impediments to the healthy functioning of competitive markets without hindering successful competitors or imposing burdens on third parties, which may result from the EC's remedy," he said.

The US continues to be active in its enforcement of Microsoft's compliance with the settlement and this work has resulted in substantial changes to Microsoft's business practices, according to Pate.

The EC's decision to require Microsoft to share details of the technologies used by its server products to communicate with Windows clients is similar to the US approach to curtail Microsoft's anticompetitive behaviour, Pate noted.

"Like the US decree, the EC decision appears to focus on providing competing software developers with the opportunity to build products that communicate and interoperate with Windows-based PCs. The details of the EC's requirements on this point remain to be seen," he said.

Despite the criticism – or "divergence" as Pate calls it – the US and the European Union have a good relationship on competition matters, he said.

Earlier yesterday at the close of a five-year investigation into Microsoft's European business practices, the European Commission ruled that Microsoft is an abusive monopolist. The Commission fined Microsoft and ordered the company to offer a version of Windows without the Windows Media Player software within 90 days and disclose within 120 days the details of the software interfaces used by its products to communicate with Windows.

Microsoft said it will challenge the ruling – a process that could keep the battle rumbling until 2009.