Microsoft is obliged to implement the sanctions immediately, even if it decides to appeal the Court of First Instance's decision.
This means that Microsoft will now have to disclose to any undertaking wishing to develop and distribute work group server operating systems the interfaces required for their products to be able to "talk" with the ubiquitous Windows operating system.
Microsoft will also have to offer for sale in Europe a version of Windows without Windows Media Player, although it may also market the operating system with Windows Media Player.
Background
In March this year, following a five-year investigation, the European Commission found that Microsoft broke competition law by leveraging its near monopoly in the market for PC operating systems onto the markets for work group server operating systems and for media players.
Because the illegal behaviour was still ongoing, the Commission ordered Microsoft to disclose to competitors, within 120 days, the 'specifications' (but not the source code) for its client-to-server and server-to-server communications protocols.
Microsoft was also required, by 28th June, to offer a version of Windows without Windows Media Player to PC manufacturers (or when selling directly to end users). In addition, Microsoft was fined €497 million for abusing its market power in the EU.
Microsoft paid the fine into an escrow account in July, where it will be held until the appeal against the ruling has been resolved, but it has not yet been forced to comply with the other sanctions. Instead, the software company asked the Court of First Instance to suspend the sanctions until the antitrust appeals process had been completed – a process that could take up to five years to complete.
In June the Commission confirmed that it would not enforce the sanctions until the European Court of First Instance had decided whether a suspension was actually appropriate.
Yesterday the Court ruled that no such suspension was necessary.
The ruling
To be successful in obtaining a suspension of the sanctions, Microsoft had to prove two things: firstly that it has a case that might justify annulment of the sanctions when the main case is heard, and secondly that there is an urgent need for suspension.
On this occasion, according to the order issued by the President of the Court of First Instance, Bo Versterdorf, yesterday, Microsoft did not show that it might suffer serious and irreparable damage as a result of implementation of the sanctions.
On the question of interoperability, the President found that Microsoft did have a case that might justify annulment of the Commission's decision to impose the sanction. But the President said that Microsoft had not provided evidence showing that disclosure of the specifications would cause serious and irreparable damage, and accordingly there was no urgent need for the sanction to be suspended.
In particular, said the President, Microsoft had not shown that the use by competitors of the information disclosed would lead to its "dilution", cloning of Microsoft's products or an irreversible development on the market.
The President also found that the software giant had shown neither that it would be damaged by competing products remaining in the distribution channel even if the decision was later annulled, nor that the company would be required to make a fundamental change in its business policy.
As regards the tying of Windows and Windows Media Player, the President found that the company did have a case that might justify annulment of the Commission's decision to impose the tying element of the sanctions, but that the requirement of urgency was not met because Microsoft had not demonstrated specifically that it might suffer serious and irreparable damage owing to an interference with its business policy or to injury to its reputation.
The substance of the case, namely Microsoft's original appeal against the Commission's decision, still remains to be heard. The current ruling, on the suspension of sanctions until that appeal is heard, will have no influence on the outcome of the main case.
It can, however, be appealed. Microsoft is currently considering its position in this regard.
Reactions to the ruling
Microsoft has tried to put a positive spin on the ruling, expressing encouragement at a number of aspects of the Court's discussion of the merits of the case.
"While the Court did not find immediate irreparable harm from the Commission's proposed remedies," said the company in a statement, "the Court recognised 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."
Speaking at a press conference yesterday, Brad Smith, Senior Vice President and General Counsel for Microsoft, confirmed that the company would be complying with the terms of the order.
"We will activate later today a web site that our competitors will be able to go to, to start getting information and start going through the process of licensing the communications protocols," said Smith. "Similarly, we will go forward immediately to continue and then complete the work needed to offer in Europe the additional version of Windows that we are required to provide."
"We have an agreed-upon timetable with the European Commission. Under that timetable, we will complete the final stages of testing and then this additional version of Windows will be made available to PC manufacturers in Europe in January, and it will make its way throughout the rest of the distribution channel so that we expect that resellers in Europe will have this version available to them by February," he explained.
Microsoft does not need to offer a version of Windows without the media player outside Europe. And given that it will charge PC makers the same price for the reduced version within Europe as it will for the version that bundles the media player, it is difficult to imagine high demand for the reduced version.
But some analysts have suggested that the significance of the measure is in the precedent it sets: unbundling orders in antitrust cases could hurt any company that adds extra functionality into successful products.
The European Commission welcomed the ruling and the consequent implementation of sanctions, stressing that this will not only benefit consumers of computer products in terms of choice of media players on computers and choice of work group servers, but also stimulate innovation.