Microsoft to Immediately Comply with EU Remedies

Updated: Its appeal shot down, Microsoft says it will begin complying immediately with EC penalties, including unbundling Windows Media Player and sharing communications protocols with rivals.

A European Union judge has denied Microsoft Corp. a reprieve from the antitrust penalties imposed by the European Commission in March—a serious blow to Microsofts case. Microsoft said it would begin complying with the order immediately.

In a 91-page decision issued on Wednesday morning, Judge Bo Vesterdorf, the president of the EUs Court of First Instance (CFI), said Microsoft had failed to prove its case. "The application must therefore be dismissed in its entirety," he wrote.

The decision forces Microsoft to sell a version of Windows without bundling Windows Media Player and to reveal secret communications protocols. While Microsoft may still appeal the CFIs decision with the European Court of Justice, the company said it will begin complying right away.

/zimages/4/28571.gifClick here to read why Microsoft Watchs Mary Jo Foley says unbundling IE and Media Player could be a positive thing for Microsoft.

Aside from its immediate effects, the legal opinion handed down by Vesterdorf, a senior figure in the EUs legal world, is expected to have a profound influence on future EU competition cases. Microsoft is expected to appeal the decision with the European Court of Justice.

"This is a great victory for free software," said Carlo Piana, a partner at Milan law firm Tamos Piana & Partners, which represents the Free Software Foundation Europe, an open-source group that is opposing Microsoft in the case. "It is a straightforward demonstration that we were completely right. The market is desperately awaiting these kinds of remedies."

Microsoft said it is "encouraged" that Vesterdorfs decision recognized that the Redmond, Wash., company had presented some strong arguments. "While the Court did not find immediate irreparable harm from the Commissions proposed remedies, the Court recognized that some of our arguments on the merits of the case are well-founded and may ultimately carry the day when the substantive issues are resolved in the full appeal," the company said in a statement.

Microsoft pointed out that the court agreed that there was a prima facie case, one of the three requirements for winning its appeal. Microsoft also had to prove that the penalties would cause harm that couldnt be repaired if the Commission eventually loses the case, and that the "balance of interests" favored the company.

The company said it hopes the courts decision will help to reopen settlement negotiations with the Commission. The company stated it believes the remedies will "harm many users of the Windows operating system and the thousands of companies across Europe who have built their businesses on the Windows platform," but said it will comply with the court order.

Microsoft said it is reviewing the decision before announcing its next step. It has two months to file an appeal. Legal experts said an ECJ decision could arrive relatively quickly—about four months after the appeal—because most of the evidence-gathering has already been done.

In the meantime Microsoft will immediately begin complying with the Commissions decision, Microsoft General Counsel Brad Smith said in a press conference call. The company will begin supplying a version of Windows without Windows Media Player to computer makers next month, which should arrive in the retail channel in February, Smith said. On Wednesday afternoon Microsoft will create a Web site for sharing communications protocols with rivals, Smith said.

The Commission said it is "not in the process of renegotiation" with Microsoft, Commission competition spokesman Jonathan Todd said in a statement. He said the ruling "means the March 2004 decision becomes effective immediately." The Commission may press Microsoft to immediately begin preparing to implement the remedies, although actual implementation may not begin before the ECJ gives its ruling, according to legal analysts.

The ruling "preserves the effectiveness of antitrust enforcement in particular in fast moving markets as in this case," Todd stated.

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