Microsoft Sidesteps EU Appeal Questions

Microsoft officials pledge cooperation but are keeping their legal options open.

Will Microsoft appeal the ruling by the European Unions second-highest court that the software maker abused its dominant market position to the detriment of competitors? Microsoft officials arent saying.

"We have not made that decision yet. We need time to read and re-read the decision," Brad Smith, Microsofts general counsel, said at a Luxembourg press conference. "Theres plenty of time for that."

The Sept. 17 ruling by the European Court of First Instance upheld a 2004 European Commission decision that Microsoft unfairly withheld Windows code from competitors to give it an unfair advantage over rivals. The 2004 decision required Microsoft, of Redmond, Wash., to share its code to improve interoperability with other systems.

The ruling also required Microsoft to offer a version of the Windows operating system without Media Player, and fined the company $613 million for its transgressions. Microsoft has offered a non-Media Player version of Windows in Europe for the last two years.

"This is a disappointing [ruling] for Microsoft," Smith said of the European courts decision. "Its not what we hoped for, but it provides some clarity and we hope we can start a new relationship with the EU."


Click here to read more about Microsofts antitrust defeat.

Neelie Kroes, the European commissioner for Competition Policy, said during a separate press conference that the decision set an important precedence for the Commission to regulate competition in the technology market.

"The court has confirmed that Microsoft cannot regulate the market by imposing its products and services on people," Kroes said. "The court has confirmed that Microsoft can no longer prevent the market from functioning properly and that computer users are therefore entitled to benefit from choice, more innovative products and more competitive prices."

Kroes said that since Microsofts decision to appeal the 2004 ruling, businesses and consumers have suffered. Over that time, she said, "Microsofts market share has grown to 80 percent of work group servers, up some 40 percent when the Commissions investigation began."

As a result, she said, "Microsofts media player format has…come to dominate the market."

While considering Microsofts legal options, Smith said the decision has widespread implications for any dominant technology player in Europe. Smith said Apple holds about 70 percent of the European online music market and Google controls 70 to 90 percent of the search market. In addition, IBM has a dominant share of the mainframe server market.

"The decision gives the Commission quite broad powers and discretion," Smith said.

Kroes dismissed Smiths comments.

"You may hear scare stories about the supposed negative consequences of this ruling for other companies and other innovation on the market," she said. "Recent years have certainly seen innovation in high technology markets—but largely in areas that Microsoft does not control."

Most importantly, Kroes said, is that the decision confirms Microsofts obligation to make interoperability information available on "reasonable and non-discriminatory terms," a statement Smith said was open to interpretation.

"The decision did not say the only reasonable [licensing] price is zero," he said. "The prices have to be prices that are reasonable. We are open for business when it comes to licensing."

Microsofts current pricing for communications protocols is 1 percent of the revenues generated from the product.

Smith said Microsoft has made "some progress" in negotiating with the European Commission, but "some issues remain open."

Not the least of which is an appeal that would delay any significant implementation of the Sept. 17 decision.


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