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China gives Microsoft 20 days to provide explanation in anti-trust probe

BEIJING (Reuters) - A Chinese anti-trust regulator said on Monday it has given Microsoft Corp 20 days to reply to queries on the compatibility of its Windows operating system and Office software suite amid a probe into the world's largest software company.

The State Administration for Industry and Commerce (SAIC) questioned Microsoft Vice President David Chen and gave the company a deadline to make an explanation, the agency said in a short statement on its website.

Microsoft is one of at least 30 foreign companies that have come under scrutiny by China's anti-monopoly regulators as the government seeks to enforce its six-year old antitrust law. Critics say the law is being used to unfairly target overseas businesses, a charge the regulators deny.

According to a state media report on Monday, Microsoft's use of verification codes also spurred complaints from Chinese companies. Their use "may have violated China's anti-monopoly law", the official Xinhua news agency said on Monday.

Verification codes are typically used by software companies as an anti-piracy mechanism. They are provided with legitimate copies of software and can be entered to entitle customers to updates and support from the manufacturer.

Microsoft has long suffered from piracy of its software within China. Former Chief Executive Steve Ballmer told employees in Beijing that the company made less revenue in China than it did in the Netherlands.

Complaints about verification codes potentially violating anti-monopoly laws are Kafka-esque, said Duncan Clark, chairman of Beijing-based tech consultancy BDA.

"It's hard to make sense of and hard to see how Microsoft can appease," said Clark. "How does an anti-piracy measure constitute monopolistic behavior if other suppliers can also use the same technique?"

SAIC also repeated that it suspected the company has not fully disclosed issues relating to the compatibility of the software and the operating system.

"(A) special investigation team conducted an anti-monopoly investigation inquiry with Microsoft Vice President Chen Shi (David Chen), and required that Microsoft make a written explanation within 20 days," the SAIC said in a statement on its website.

In a statement, Microsoft said it was "serious about complying with China's laws and committed to addressing SAIC's questions and concerns".

Last month, a delegation from chipmaker Qualcomm Inc , led by company President Derek Aberle, met officials at the National Development and Reform Commission (NDRC) as part of that regulator's investigation of the San Diego-based firm.

NDRC said earlier this year that the U.S. chipmaker is suspected of overcharging and abusing its market position in wireless communication standards.

Microsoft's Nadella is expected to make his first visit to China as chief executive later this month.

(Reporting by Michael Martina and Matthew Miller; Additional reporting by Paul Carsten; Editing by Miral Fahmy)

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