EU Court: Microsoft Abused Power

The European Court of First Instance in Luxembourg has ruled against Microsoft in its appeal of a March 2004 finding of the European Commission. In so doing, the Court upholds the EC's finding that Microsoft abused its dominant market position in Europe, first by failing to supply access to its protocols for enabling interoperability with its communications software in Windows and Windows Server, and second by bundling its Media Player with Windows XP.

"The Court considers that the Commission was correct to conclude that the work group server operating systems of Microsoft's 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," reads a press release issued by the Luxembourg court this morning. "The absence of such interoperability has the effect of reinforcing Microsoft's competitive position on the market and creates a risk that competition will be eliminated."

The original conduct which earned Microsoft the rebuke of the Court took place in 1998, when Sun Microsystems sought enough information from Microsoft on its server and communications protocols to enable interoperability with Sun's own server software, which we now know as Solaris. As the Court saw it, Microsoft had argued that there was actually enough information about Windows in the public domain for Sun to make a fairly interoperable system, and that the degree of interoperability Sun was pleading for would effectively make its server "mimic" Windows, or essentially be Windows by another name.

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In its decision (not the press release, but the decision itself), the Court of First Instance rejected that argument flatly. "The way in which Microsoft interprets the degree of interoperability required by the Commission and, accordingly, the scope of the information referred to by the contested decision is incorrect," the decision reads.

In its upholding of the EC decision on Media Player, the Court's press release states, "The Court finds that the Commission clearly demonstrated in the contested decision that the fact that Microsoft offered OEMs only the version of Windows bundled with Windows Media Player had the inevitable consequence of affecting relations on the market between Microsoft, OEMs and suppliers of third-party media players by appreciably altering the balance of competition in favour of Microsoft and to the detriment of the other operators."

So the Court has upheld the basic assertions of the EC's 2004 ruling and its 2005 Statement of Objections charging Microsoft with non-compliance with that ruling. It upholds the fine against Microsoft of 497 million Euro. However - in an extremely important part of the finding - the Court annulled one portion of the EC's ruling that forces Microsoft to pay the cost of establishing an independent monitoring trustee to keep tabs on its future behavior.

As the Court's press release summarizes it, "The Court finds that the 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...The Court considers that the Commission exceeds its powers in so far as it makes Microsoft responsible for all the costs associated with the monitoring trustee."

In a hastily convened press conference this morning, Microsoft general counsel Brad Smith sounded a conciliatory tone. "It's clearly very important to us as a company that we comply with our obligations under European law. We'll study this decision carefully, and if there are additional steps that we need to take in order to comply with it, we will take them. It will take us a little bit of time, at least over the next few hours, to read the decision carefully, but certainly that is one of our strongest convictions as we go forward.

"I would note that a lot has changed since this case started in 1998. The world has changed, the industry has changed, and our company has changed...We've sought to be open and transparent, and we've sought to strengthen our ties with the rest of our industry. Indeed, it's 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."

For more: Inside the EU Court's Ruling: Microsoft's Abuse of Dominance

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