Microsoft to Pay Daum $30 Million

Microsoft (MS) Corporation agreed to pay Daum Communications Corp. $30 million (approximately 30 billion won) in the dispute over Internet messenger bundling.

The Fair Trade Commission (FTC) will continue to investigate into consumer damages caused by Microsoft Korea by undermining fair competition based on its strong market control of the Windows operating system (OS), despite the agreement between the two companies.

Daum announced on November 11 that it would drop its civil lawsuit and complaint filed with the FTC on MSN Messenger bundling in exchange for the receipt of a total of $30 million ($10 million in cash, $10 million for advertising, and $10 million for business cooperation). Business cooperation will reportedly be offered in return for Daum’s provision of online contents to MS.

As a result, Daum revoked its complaint filed with the FTC in 2001 that said, “MS Korea is hampering fair competition by bundling its messenger with Windows,” and decided to drop last year’s damage suit worth $10 billion.

A month earlier, MS also dropped the case on Media Player bundling by paying $760 million to RealNetworks Corporation and reconciled with Sun Microsystems by paying $1.95 billion last year, which were all settled in cash.

Daum suffered a loss of 1.5 billion won in operations during the third quarter (July to September), and it appears to have accepted MS’s deal because of its underperformance since the acquisition of Lycos U.S. last year. With the settlement, Daum will have over 30 billion won to ease its cash-strapped management while MS is likely to achieve a more favorable final ruling by the FTC.

Meanwhile, the antitrust agency stated that it would not cease discussions on whether to punish MS for its bundling allegation.

The general meeting of the commission has completed verifying the facts about the MS case and is currently deciding on the use and the level of sanction, the result of which is expected to be released no later than this month.

“The case affects the entire market, so the cancellation of complaint by the concerned party does not influence the deliberation process,” the FTC explained.

Do-Young Kim nirvana1@donga.com changkim@donga.com