Court upholds EC's antitrust ruling against Microsoft

By Colleen Taylor, Contributing Editor -- Electronic News, 9/17/2007

A European court has upheld a European Commission (EC) antitrust ruling against software industry behemoth Microsoft Corp.

In a decision made today, the Court of the First Instance (CFI) upheld the EC's 2004 ruling that Microsoft has abused its dominant market position. In June 2004, Microsoft filed an application for annulment of this decision with the CFI; however, the CFI has now confirmed the totality of the fine imposed by the EC, which stands at about $689 million (497 million Euros) for Microsoft's alleged infringement of the EC's treaty rules. The EC has since pressed additional fines against Microsoft for failing to comply with the 2004 ruling, fines which the software company has protested.

A major issue in the case was Microsoft's bundling software products otherwise available on a stand-alone basis into the ubiquitous Windows operating system. According to the EC, Microsoft had leveraged its near monopoly in the market for PC operating systems onto the markets for work group server operating systems and for media players, conduct that allegedly hindered innovation in the markets concerned to the detriment of consumers. As punishment, the EC has ordered Microsoft to disclose interoperability information which would allow non-Microsoft work group servers to achieve full interoperability with Windows PCs and servers and to offer a version of its Windows operating system without Windows Media Player.

The CFI's ruling confirmed that the EC was correct in its judgment, and Microsoft must now comply fully with its legal obligations to desist from engaging in anti-competitive conduct. However, the CFI annulled the decision in so far as it orders Microsoft to submit a proposal for the appointment of a monitoring trustee with the power to have access, independently of the EC, to Microsoft's assistance, information, documents, premises and employees and to the source code of the relevant Microsoft products and in so far as it provides that all the costs associated with that monitoring trustee be borne by Microsoft.

Naturally, the EC has expressed pleasure that the CFI has backed its original verdict. "The court has upheld a landmark Commission decision to give consumers more choice in software markets," EC Competition Commissioner Neelie Kroes said in a statement. "That decision set an important precedent in terms of the obligations of dominant companies to allow competition, in particular in high tech industries."

For its part, Microsoft seems to be taking a cooperative stance on the ruling. "It's clearly very important to us as a company that we comply with our obligations under European law," Brad Smith, Microsoft's general counsel and senior VP, said in a separate statement issued this morning. "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."

Meanwhile, a cadre of Microsoft's tech industry rivals including IBM, Nokia, Oracle, Sun Microsystems, and others, which have banded together in a group dubbed ECIS, has also voiced its support for the ruling. "At long last, this decision opens the prospect for dynamic competition in the software industry," Thomas Vinje, ECIS' legal counsel and spokesman, said a statement from the group. "No more user lock-in, no more monopoly pricing."

The EC said it will "carefully analyze" the judgment and will consider its implications for future antitrust enforcement in these sectors and in others.