EU Court Strikes Down Microsoft Appeal of Antitrust Ruling

By Peter Galli  |  Posted 2007-09-17

EU Court Strikes Down Microsoft Appeal of Antitrust Ruling


EU Court Strikes Down

Microsoft Appeal of Antitrust Ruling">

The European Court of First Instance upheld on Sept. 17 the findings of the European Commission that Microsoft abused its dominant position by refusing to make its products interoperable with those of its rivals and by tying Windows Media Player to the Windows operating system.

The court also upheld the $613 million fine imposed on Redmond, Wash., software maker.

This latest judgment follows the ruling by the European Union in March 2004 that Microsoft had abused its dominant market position with Windows, and the company was ordered to offer to manufacturers a version of Windows without Windows Media Player. It was also slapped with the fine.

The EU ruling that Microsoft used its "near monopoly" in the desktop operating system market to create an illegal advantage in related software markets followed a five-year investigation.

By playing on the interoperability of Windows and its servers, Microsoft was able to override other factors of server performance offered by rivals, the commission found. Microsoft is required to disclose interface information that allows other servers to comparably interoperate with Microsoft products, the commission ruled.

Click here to read more about Microsofts record fine.

The order also prohibited Microsoft from using "any commercial, technological or contractual terms" that would make the unbundled version of Windows less attractive. "In particular, [Microsoft] must not give PC manufacturers a discount conditional on their buying Windows together with [Windows Media Player]," the commission said.

Microsoft General Counsel Brad Smith said in a statement early Sept. 17 that he and other company officials need more time to study the ruling before determining the next steps but did say that Microsoft is determined to comply with European laws.

"[T]heres obviously a lot of work that has gone into our efforts to comply with the commissions terms with respect to communications protocols and our duty to license them, a duty that obviously was reaffirmed by the courts decision today," Smith said. "Weve made a lot of progress in that regard, and yet we all have to acknowledge that there are some issues that do remain open."

Microsoft appealed the March 2004 judgment in June of that same year, claiming the decision does not "serve the interests of consumers."

But in June 2005, the company released Windows XP N, its Media Player-free version of Windows.

In its decision, the European Court of First Instance said the commission was "correct to conclude that the work group server operating systems of Microsofts competitors must be able to interoperate with Windows domain architecture on an equal footing with Windows operating systems if they are to be capable of being marketed viably.

"The absence of such interoperability has the effect of reinforcing Microsofts competitive position on the market and creates a risk that competition will be eliminated," the court said in its ruling, which can be found here in PDF form.

Six states want Microsofts U.S. antitrust consent decree extended by five years. Click here to read more.

The court also upheld the commissions decision to force Microsoft to offer a version of Windows without its media player installed but noted that Microsoft retains the right to continue to offer the version bundled with Windows Media Player as well.

"We have been working hard over the last few years to address these issues," Smith said. "Everyone agrees, for example, that the version of Windows that we offer in Europe today is in compliance with the commissions 2004 decision, and Im also gratified that we were able to have the kinds of constructive discussions with the European Commission last year that enabled us to bring to market Windows Vista in conformity with the commissions 2004 decision."

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: Fine Remains Unchanged">

The court also found that the commission "did not err in assessing the gravity and duration of the infringement and did not err in setting the amount of the fine. Since the abuse of a dominant position is confirmed by the Court, the amount of the fine remains unchanged."

But, in the only part of the decision that went in Microsofts favor, the court set aside the requirement that a monitoring trustee be appointed, saying this has no legal basis in community law.

"The Court criticizes, in particular, the obligation imposed on Microsoft to allow the monitoring trustee, independently of the Commission, access to its information, documents, premises and employees and also to the source code of its relevant products," the court said.

The problem here is that there was no time limit set for the trustees oversight, and Microsoft was expected to pay all the costs associated with that trustee, the European Court said.

"The [European] Commission has no authority to compel Microsoft to grant to a monitoring trustee powers which the Commission itself is not authorized to confer on a third party," it said, adding that "there is no provision of community law that authorizes the Commission to require an undertaking to bear the costs which the Commission itself incurs as a result of monitoring the implementation of remedies."

Microsofts Smith said the ruling on the trustee was a nice—though somewhat small—victory.

"We appreciate the courts judgment on the trustee issue and the monitoring mechanism, an issue where the court agreed with us, and yet I would be the first to acknowledge that I dont think anyone would say that is the most important part of this case or this decision," he said.

The appeal of this decision by Microsoft is also limited in scope, the European Court said. "An appeal, limited to points of law only, may be brought before the Court of Justice of the European Communities against a decision of the Court of First Instance, within two months of its notification."

More information on the courts decision and its history can be found here.

Read here why the Department of Justice says the Microsoft antitrust settlement does promote competition.

Lars Liebeler, the antitrust counsel for industry body CompTIA (Computing Technology Industry Association), in Oakbrook Terrace, Ill., criticized the decision, saying it represents a significant blow to free enterprise in Europe.

"Rather than supporting Europe as the innovation capital of the world, the Commissions policies unchecked may turn the EU into the litigation capital of the world," he said in a statement released Sept. 17.

The courts decision encourages competitors to bring legal action against one another rather than compete aggressively in the marketplace, Liebeler said, adding that the court has made it clear that government officials will play a central role in determining the contours and direction of technology markets and the design of products in those markets, even if that involvement is contrary to consumer wishes, rather then focusing on the fundamental principles of consumer choice and market economics.

Smith noted that much in the world and the industry has changed since the case started in 1998, and that Microsoft changed as well.

"We sought to underscore that over a year ago when we published what we described as our Windows Principles, principles intended to ensure that future versions of Windows, starting with Windows Vista, would comport not only with the principles of U.S. law but with the principles that are applicable here in Europe as well," he said. "Weve sought to be open and transparent, and weve sought to strengthen our ties with the rest of our industry. Indeed, its notable that just last week we announced a new agreement with Sun Microsystems, and the week before that we announced a new agreement with Novell, two of the companies that started out on the other side of this case almost nine years ago.

"A lot has changed, but I will say that one thing has remained constant, and will continue to do so, and that is Microsofts commitment to Europe."

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