EU rules against software giant on two accounts

Microsoft loses appeal

Microsoft today lost its appeal against the antitrust decision and the resultant changes imposed on its business practices by the European Commission in 2004.

The European Court of First Instance, based in Luxembourg, backed the commission’s decision to fine Microsoft €497 million (£345 million) as well as it forcing it to release a version of Windows without its Media Player software – despite this version being largely ignored by both OEMs and resellers.

It, however, only partially upheld Microsoft’s appeal over whether or not it should have to pay for EU monitoring of its business practices to ensure compliance.

"The commission did not err in assessing the gravity and duration of the infringement and did not err in setting the amount of the fine," the Court said in its 248-page judgement.

Today’s judgement largely concerns Microsoft’s refusal to disclose information to its rivals about how Windows communicates with networks and the subsequent €280.5 million (£195 million) additional fine the commission then levied upon the software maker – the total amount being the sum of a daily fine that the EU enforced until Microsoft complied.

Microsoft’s decision to refuse to obey the ruling saw the EU’s competition commissioner Neelie Kroes say in April: "we have never had an experience like this one." She was so concerned about the potential for destroying the commission’s creditability on antitrust cases that she said a break-up or "structural remedy," might be appropriate.

Microsoft had argued that the commission’s decision wasn’t justified since it wasn’t necessary for its rivals to access what it described as it "so-called network protocols" to connect their severs with its own.

The company had argued that the EU’s 2004 decision would "limit our ability to innovate in Windows in the future, diminish the developer appeal of the Windows platform and increase our product development costs."

It also said that the decision would unfairly allow its competitors to "better mimic the functionality of Microsoft’s own products which could result in a reduction in sales."

The Court however found that Microsoft had failed to supply its competitors with enough information and dismissed its statement that they didn’t need access to the protocols and APIs (application programming interfaces) in order to improve interoperability.

The Court also said that Microsoft had failed to sufficiently show that supplying its competitors with this information would adversely impact upon its ability to compete.

On the bundling of Windows Media Player, the court upheld the commission’s original stance, ruling that Microsoft had failed to adequately argue its case for bundling the software in with Windows to OEMs. It is currently unclear what further ramifications, if any, decision will have upon the future bundling of Windows Media Player with Microsoft’s operating systems.

Microsoft general counsel Brad Smith said the company will study the decision carefully. "If there are additional steps that we need to take in order to comply with it we will take them,” Smith told reporters outside the courtroom.

"That decision set an important precedent in terms of the obligations of dominant companies to allow competition, in particular in high-tech industries," EU competition commissioner Neelie Kroes said in a statement.

"The court ruling shows that the Commission was right to take its decision. Microsoft must now comply fully with its legal obligations to desist from engaging in anti-competitive conduct. The Commission will do its utmost to ensure that Microsoft complies swiftly," she said.

"This judgment confirms the objectivity and the credibility of the commission’s competition policy,” commission president Jose Barroso said in a statement. "This policy protects the European consumer interest and ensures fair competition between businesses in the internal market.”

The decision is likely to strengthen the commission’s authority over other antitrust cases that it is currently presiding over including Intel, Rambus and Qualcomm – all who, the commission argues, dominate their respective markets or hold key patents that damage competition.

Both Microsoft and the commission will be able to appeal today’s decision at the European Court of Justice. The commission said that it welcomed the ruling while also saying that it would issue a further and more detailed statement later on today.

Microsoft may still face another probe with the commission currently questioning the software company’s rivals over whether or not they believe the company has used its dominance in the word processing and spreadsheet markets to thwart rivals through its refusal to open the formats Word and Excel use and to prevent interoperability.

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