The decision is seen as a key victory for the European
competition regulator, and a serious blow for the US software
giant, in the long-running competition dispute.
The European Court of First Instance rejected Microsoft's appeal
against a record €497million fine imposed by the European
Commission three years ago.
The court upheld an earlier 2004 ruling that Microsoft had
abused its dominant market position, using its dominant 95% market
share of the personal computer operating systems market to freeze
out rivals.
The court upheld the earlier ruling that the software group had
broken competition rules in two ways.
The first type of conduct found to constitute an abuse was
Microsoft's refusal to supply rival companies with
"interoperability information" – crucial information about the
Windows operating system.
By way of remedy the Commission requires Microsoft to disclose
the "specifications of its client/server and server/server
communication protocols to any undertaking wishing to develop and
distribute work group server operating systems."
The second breach was that by bundling its Windows Media Player
with the Windows PC operating system, this undermined competition
from other media player providers.
By way of remedy here, the Commission requires Microsoft "to
offer for sale a version of Windows without Window Media
Player."
The court's statement said: "The Court of First Instance
essentially upholds the Commission's decision finding that
Microsoft abused its dominant position."
The court also upheld the fine imposed on Microsoft for
anti-competitive practices in the 2004 decision. The court ruled
that the Commission was justified in "assessing the gravity and
duration of the infringement and did not err in setting the
fine."
The latest ruling – which comes after a nine year legal battle -
was made by the 13-judge Grand Chamber of the Court if First
Instance in Luxembourg. The importance of the ruling was underlined
by it being broadcast live on television – a first for such a
decision.
Although the ruling of the Court of First Instance on facts is
final, Microsoft has two months to appeal on matters of law to the
European Court of Justice – the EU's highest court.
The court threw out just one small part of the European
Commission ruling, reversing a decision on the creation and funding
of an independent monitoring trustee, effectively to supervise
Microsoft's behaviour.
Industry experts say the ruling will have big repercussions not
only for the regulator, but for Microsoft and its rivals.
If the ruling had not been upheld it would have been seen to
seriously weaken the European Commission's ability to pursue fresh
cases against Microsoft and other dominant groups.
Guy Lougher, national head of the EU & Competition Group at
Pinsent Masons, the law firm behind OUT-LAW.COM, said the verdict
would have major consequences for other similar cases stuck in the
court system.
"As matters currently stand, the Court of First Instance's
judgment will invigorate the European Commission and national
competition authorities across the EU, which have been
soft-peddling in relation to a number of ongoing cases in the
software and other industries pending the CFI's judgment.
"We can expect to see the principles of the case now being
rolled-out more actively in national courts and by national
competition authorities within the EU. The case clearly has
implications for the software industry, where the commercial
practices of a number of large companies are already under review,
such as Intel, Rambus and Apple.
"However, the bundling aspects of the case will need to be
reviewed carefully by large incumbent operators in other industries
who sell goods or services only as a package, but where there is a
demand to purchase them separately, if the bundling adversely
affects rivals and where there is no objective justification for
the bundling."
Microsoft's rivals welcomed the court decision. Thomas Vinje,
the legal representative of ECIS - a group which includes IBM,
Nokia, Oracle and Sun Microsystems – told FT.Com: "This is a great
day for European businesses and consumers.
"At long last, the decision opens the prospect for dynamic
competition in the software industry. No more user lock-in, no more
monopoly pricing."
The Free Software Foundation Europe (FSFE) said the verdict was
"a triumph for freedom of choice and competition." Georg Greve,
president of FSFE, said: "Microsoft can consider itself above the
law no longer.
"Through tactics that successfully derailed antitrust processes
in other parts of the world, Microsoft has managed to postpone this
day for almost a decade. But thanks to the perseverance and
excellent work of the European Commission, these tactics have
failed in Europe."
Greve added that the decision was "a very important precedent"
for the future. "Secret manipulation of open formats and protocols
has clearly been marked as unacceptable conduct."
In its immediate response to the ruling, Microsoft said it was
important now for the company to comply with European competition
law. Brad Smith, senior vice president and corporate secretary,
said: "It is clearly very important to us as a company that we
comply with our obligations under European law.
"We will study this decision carefully and if there are
additional steps that we need to take to comply with it we will
take them."
Speaking in Luxembourg, Smith did however point out that "a lot
has changed" since the case started back in 1998. He said: "The
world has changed, the industry has changed and our company has
changed.
"To underscore that, over a year ago we published our ''Windows
Principle' to ensure that future versions of Windows – starting
with Windows Vista – would comport not only with the principles of
US law but also European law. We sought to be open and transparent
and strengthen our ties with the rest of our industry.
Smith concluded: "One thing that has remained constant and will
continue to do so is Microsoft's commitment to Europe.
"When this case started we published Windows in 24 European
languages, today that is 42. When the case started we had 3,900
employees in Europe, today it is 13,000. When the case started we
were spending $3 million on research and development, today it is
almost half a billion dollars. These numbers will continue to
grow.
"We look forward to continued efforts to implement and comply
with the decision, and we look forward to hopefully continuing to
move technology forward and creating more jobs in this
continent."
