"Under NO circumstances lose against Linux," Ayala said in the July memo.
A European Microsoft memo was leaked that implies that Microsoft has a budget or a fund to allow them to sell their products at a deep discount, or even free, rather than lose marketshare to Linux.

The memo is pretty old- July of 2002 it seems. But, supposedly Microsoft drastically cut prices for Windows CE in direct response to some handheld platforms switching to Linux

Microsoft of course defends the practice as the normal cost of doing competitive business. However:

Steep discounts such as those detailed in the leaked memos could run Microsoft afoul of regulations in Europe, the Herald Tribune report mused. Under European law, companies that have a dominant position in a market are prohibited from offering discounts designed to hinder competition.
Is this Microsoft using "unfair" practices to get and maintain marketshare. OR, is Microsoft using commonly accepted business practices, but just being forced to play by different rules simply because they are dominant?

It seems unreasonable to say that a company NOT in the dominant position can discount or give away their product in order to win some of the marketshare while prohibiting the market leader from doing the same to maintain their marketshare.

Is Microsoft supposed to follow different rules until one of their competitors passes them in marketshare and only THEN can they implement such programs in order to regain the lead?

Here is the full article