EU Ruling Could Further Alter Windows Bundling

The expected European ruling this week against Microsoft is likely to set a precedent for when and where the software maker can add software and functionality to the operating system, opening it to further antitrust lawsuits, experts say.

When European Union regulators rule this week in their antitrust case against Microsoft Corp., their decision will do more than possibly force the software maker to offer Windows without a bundled multimedia player.

It appears likely to set a precedent for when and where Microsoft can integrate other software into the operating system and also to provide a legal analysis that could be used in private antitrust action against Microsoft in Europe, say legal experts and IT analysts.

The European Commission is expected to approve on Wednesday findings and recommended remedies against Microsoft that include a requirement that Microsoft offer two version of Windows for Europe—one with Windows Media Player included and another with it stripped out.

The EUs competition commissioner, Mario Monti, indicated the precedent-setting nature of the likely remedies in a statement last week after talks broke down between the EU and Microsoft CEO Steve Ballmer.

"It is essential to have a precedent that will establish clear principles for the future conduct of a company with such a strong, dominant position in the market," Monti wrote in the statement.

/zimages/3/28571.gifRead more here about how the EU rulings could affect the schedule of Windows releases.

With the EU leaning toward a ruling that would determine when Microsoft could and could not add functionality into Windows, the software maker will "fight it to the bitter end," said Matt Rosoff, an analyst at Directions on Microsoft in Kirkland, Wash.

Thats because the ramifications could extend to other bundling of software and functionality. Internet Explorer, which Microsoft considers part of Windows, is one example. The company also has added firewall capabilities into the OS. It is moving its SQL Server file system, WinFS, into the next major Windows release, code-named Longhorn.

Redmond, Wash.-based Microsoft also has been developing its own Web search capabilities that observers say it is considering adding into Windows, Rosoff said.

"Could Google file suit in the EU?" Rosoff asked. "It paves the way for private antitrust lawsuits in Europe. Its the long-term precedent Microsoft is worried about."

Rosoff said he doubts that the specific remedy of splitting off Media Player will have much effect. Most OEMs, he said, are likely to continue using the bundled version for simplicitys sake and because the cost savings for consumers would be minimal.

Along with the threat of more unbundling, the EU decision also could lay out a legal analysis that has ripple effects on other cases, even in the United States, said Donald Falk, a partner at Mayer, Brown, Rowe & Maw LLP in Palo Alto, Calif.

The implications are not yet fully clear, since the EU has yet to release its ruling and analysis. But the ruling could be used even in U.S. cases as an analysis supporting claims of abuse of monopoly power, even if a court is not bound by it, Falk said. It more certainly will open Microsoft to further private antitrust claims in Europe and even to EU enforcement.

"Clearly, the commission thinks their decision will make it substantially easier to bring future enforcement action, or they would not be insisting on getting a forward-looking remedy," Falk said. "It will have persuasive force if it is a well-reasoned decision."

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