The European Court of First Instance has rejected Microsoft's
request that sanctions imposed on them following an antitrust
ruling by the Commission be suspended until an appeal of the
antitrust decision is completed.
The European Court of First Instance yesterday rejected Microsoft's
request that sanctions imposed on the software company following an
antitrust ruling by the Commission be suspended until an appeal of
the antitrust decision is completed.
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.
