A European court dealt a severe blow to Microsoft's competitive ambitions in Europe on Monday by siding with regulators in an antitrust case against the company.
In its ruling, the Luxembourg-based Court of First Instance upheld European Commission claims that Microsoft abused its dominant position in the operating-system market. Microsoft's allies and competitors have been closely following the case since the Commission imposed antitrust sanctions against the company in early 2004.
The court's decision is expected to have far-reaching implications for consumers, computer makers, Microsoft competitors and, perhaps most pointedly, the Commission's ability to regulate technology companies on antitrust matters, say legal experts and industry observers.
"The court ruling is... welcome for its confirmation of the Commission's decision and its underlying policy, but nevertheless, it is bittersweet," Neelie Kroes, the European Commission's competition commissioner, said during a press conference on Monday. "Bittersweet because the court has confirmed the Commission's view that consumers are suffering at the hands of Microsoft."
Kroes added that, should Microsoft comply with the Commission's order, she expects to see a "significant drop" in Microsoft's overwhelming market share.
And, while she gave no estimate of how steep she expects that drop to be, Kroes noted that it would likely be more than a few percentage points, as more competitors enter the market. Microsoft's Windows operating system runs on about 95 percent of the world's personal computers.
"A market share less than 95 percent is a way to measure the success [of the order]," she added. A spokesman for Kroes later clarified that a fall in market share would be a logical consequence of fairer competition.
The top antitrust regulator for the Commission also noted that it is "too early" to discuss whether there are any antitrust issues in Vista. But she added that some information may be available "not too far from now".
The 13-member court ruled that the Commission was justified in requiring Microsoft to share certain technical specifications, or protocols, with rivals so their products would work with Microsoft's Windows operating system. The Commission is also requiring Microsoft to offer an unbundled option to consumers when tying together two separate products, such as Windows and the company's Media Player software.
The court also upheld the €497m (£347m) fine imposed by the Commission, according to documents detailing the ruling.
Monday's verdict could ultimately force Microsoft to change its business practices, at least in Europe, observers say. It could also encourage antitrust regulators to pursue Microsoft in other countries.
However, the ruling will probably have no bearing on Microsoft's business in the US, where the company settled a long-running antitrust case in 2002.
The US Department of Justice on Monday issued a statement critical of the Commission's decision. "We are... concerned that the standard applied to unilateral conduct by the [Court of First Instance], rather than helping consumers, may have the unfortunate consequence of harming consumers by chilling innovation and discouraging competition. In the US, the antitrust laws are enforced to protect consumers by protecting competition, not competitors," Thomas O Barnett, assistant attorney general for the department's antitrust division, said in the statement.
Microsoft has not indicated whether it will pursue an appeal of Monday's verdict to the European Court of Justice, the highest court in Europe.
"The decision is not what we had hoped for and to say anything less would be less than candid," Brad Smith, Microsoft general counsel, said during a press conference on Monday.
While acknowledging that the court sided with the Commission on key points, the company took some solace in the fact that the court annulled the Commission's imposition of an independent trustee to monitor compliance, Smith said.
He added that Microsoft has made progress on the interoperability issues, but that more work needs to be done and will be addressed as quickly as possible.
Previously, the Commission believed the pricing Microsoft was going to charge for licensing its protocols was too steep, but the software giant responded by dropping the fee to one percent of revenues generated from its products, Smith noted.
"If the European Commission still believes that is still too high, we want to understand [their concerns] and quickly address it," he said.
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Microsoft, however, believes it has a "complete and accurate" set of technical specifications that companies have begun to license, and Smith noted that he hopes even more licensees will sign on.
As for Media Player, Smith said Microsoft has offered an unbundled version of its Windows operating system and Media Player for more than two years, and, as a result, believes it is in full compliance with the Commission's 2004 order.
Minor victory
Microsoft took some solace in the minor win the court awarded it over the Commission's use of a monitoring trustee, Smith said.
As a result of the ruling, Microsoft is not responsible for paying all the costs associated with the monitoring trustee. The court also reined in the power of the trustee, finding that the Commission has no authority to compel Microsoft to grant the trustee powers that the Commission is not authorised to confer on a third party.
Smith emphasised the progress Microsoft has made over the years to comply with the Commission's order and said… (continued)
Talkback
This is rediculous. It is like asking a King "can you confirm that you don't have power in certain area of your kingdom?"
Ofcourse European Union is going to punish Microsoft. But what EU should do is put all the talent and money they have to create a company even half of Microsoft in terms of what Microsoft has done and then think about the whole case.
It is all about power. EU would have undermined its own authority and henced ruled against Microsoft not becuse it is right or wrong.
EU people don't think with their eyes open.
The antitrust case has been upheld because Microsoft could not defend its position within competition law laid down within the EU. Its about trying to provide a more level playing field within an industry where there are monopoly players. The only reason Microsoft withhold interoperability protocols is to protect it's monopoly position because other protocols exist which are openly available which do the same thing. When all is said, if Microsoft produce the best product people will buy it and thats a good thing. If people have to buy their product because no one else can produce an alternative, only because interoperability protocols are kept secret, then thats a bad thing.
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If Microsoft keeping its interface specifications secret is unacceptable then isn't it equally unacceptable for Apple to keep iTunes proprietary or SAP not to distribute all its internal integration protocols not just a few access points or IBM, SUN, Google and all the other multinantional organisations involved in the EC dispute with MS to publish protocols down to the same level that they now demand of MS.
Of course if they don't I am sure the EC will take action to ensure that they do .............. well maybe not.
Microsoft is not being asked to disclose anything other than interoperability protocols. This is about allowing other companies to compete in an area where a Monopolist currently actively prevents competition. If iTunes was the only player in the online music business then there would be similar problems with them. Apple don't force people to download from iTunes by not allowing other formats to play on their devices so this issue does not apply. The fact of the matter is that MS don't provide the access points into windows servers required by other companies to interact with their products. If other companies in a Monopoly position acted as Microsoft does they too would be treated similarly. Google and IBM use a lot of open standards as interfaces to their products and are very focussed on interoperability with third parties, its how they make most of their money. Microsoft's business model is about providing everything Microsoft and actively prevent other companies from interacting with their systems (vendor lock in). This is about interpreting competition law in abusing a Monopoly position not about singling out any specific company.
I am not defending Microsoft or necessarily disagreeing with the EC solution I just believe if all the organisations that lined up against Microsoft were told that, as the case proceeded, they would need to provide documentation for interoperability to the same level, that they and the EC were demanding of Microsoft, that the situation would have rapidly translated to the Open Source organisations staying the course and most of the others running screeming from the action.
Most of the organisations involved in this do already provide very good interoperability specifications. In addition many use open interface standards which encourage interoperability. Many companies see this as a way of making more money because the more systems your product can interface to the more useful it is. Microsoft's has the opposite business model where they attempt to provide everything a user could need in a closed system. Anyone wanting to link into their products then has a problem because the interfaces are not divulged. This is the corner stone of this part of the case against Microsoft. Microsoft is well known for this as even when they do implement to implement a standard they always change it and add proprietary extensions it to make it harder for third parties to use.