Microsoft to appeal 'unfortunate' EU antitrust ruling

"We worked hard to reach an agreement that would address the European Commission's concerns and still allow us to innovate and improve our products for consumers," said Steve Ballmer, CEO of Microsoft. "We respect the Commission's authority, but we believe that our settlement offer from last week would have offered far more choices and benefits to consumers."

Describing the ruling as "unfortunate," the company said that it had offered to provide competitors with "unprecedented access to its technology." In addition, any personal computer sold with the Windows operating system also would have carried three non-Microsoft media players, leading to the distribution of more than one billion competing media players over the next three years.

But the Commission rejected the proposals.

The ruling

The ruling 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 is still ongoing, the Commission has ordered Microsoft to disclose to competitors, within 120 days, the interfaces required for their products to be able to "talk" with the ubiquitous Windows operating system.

Microsoft is also required, within 90 days, to offer a version of Windows without Windows Media Player to PC manufacturers (or when selling directly to end users). In addition, Microsoft has been fined € 497 million for abusing its market power in the EU.

According to European Competition Commissioner Mario Monti the decision "restores the conditions for fair competition in the markets concerned and establish clear principles for the future conduct of a company with such a strong dominant position".

The response

Microsoft has vowed to appeal. It has 70 days to file its appeal with the European Court of First Instance, and has indicated that it will at the same time request that the remedies required by the Commission be stayed until the court process is complete.

Any decision of the Court of First Instance can then be appealed to the European Court of Justice and the whole process may take up to five years to fulfil. By this time, of course, the question of media players in the Windows operating system may well be moot.

The delaying tactic afforded by the appeals process also gives both sides another chance to settle the dispute – as happened in the antitrust case brought against Microsoft by the US Justice Department.

But Microsoft's concerns are broader than simply media players. In a conference call with journalists yesterday, Microsoft's chief counsel, Brad Smith, revealed that the company believed that "the Commission today is ordering the broadest compulsory licensing of intellectual property rights since the European Community was founded more than 50 years ago."

This applied to both the interoperability and code removal requirements, said Smith. He added:

"We believe that that will infringe our IP rights in Europe and it also violates the European Union's international treaty obligations pursuant to its membership in the WTO or World Trade Organization. And so we will argue that this not only goes far too far and runs afoul of European law; it also runs afoul of the European Commission's obligations to respect the WTO's TRIPS agreement or agreement on Trade Related Aspects of Intellectual Property Rights."

Other responses

Sun Microsystems, whose 1998 complaint to the European Commission triggered the investigation, welcomed the ruling. Lee Patch, Sun's vice president of legal affairs applauded "this important, precedent-setting decision".

"By requiring Microsoft to make disclosures that will allow other servers to comparably interoperate with Microsoft desktops and servers, the Commission's decision seeks to create a level playing field in the work group server market place, enabling competitors to deliver work group servers that can fully interoperate and therefore compete on the merits. This is enormously significant for consumers and for the industry," he said.

RealNetworks, whose rival media player is set to benefit from the ruling, was also pleased with the verdict. Dave Stewart, deputy general counsel for the company, told Reuters, "We expect that PC original equipment manufacturers will take advantage of their new-found freedom. For the first time in five years they are not going to be forced to include Windows Media Player."