EU court confirms 497 million Euro fine against Microsoft

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EU court confirms 497 million Euro fine against Microsoft

Brussels (Belgium) – Microsoft started the new week with bad news out of Europe, as the European Union’s Court of First Instance (CFI) confirmed a hefty antitrust fine in the amount of nearly $700 million.

The CFI largely upheld a fine imposed by the European Commission against the software maker back in 2004.  

According to the court, Microsoft violated the EC Treaty by not creating sufficient interoperability opportunities for third-party software makers relating to the firm’s work group server operating systems and exploited its monopoly in the client operating system market to stifle competition in the multimedia player segment. However, the CFI annulled the EC’s demand that Microsoft will have to appoint and pay for a “monitoring trustee” with the power to have access information, documents, premises and employees and to the source code of the products mentioned in the ruling

The CFI confirmed the 497 million Euro fine, which translates into about $683 million today; back in March of 2004, the time of the original EC ruling and when the dollar was a bit stronger, the amount was about $613 million.

The original conclusions of the EC stated that Microsoft refuses to supply its competitors with ‘interoperability information’ and to authorize them to use that information to develop and distribute products competing with its own products on the work group server operating system market, between October 1998 and March 2004. The Commission required Microsoft 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 as a result of its findings. The Commission also said that Microsoft was engaging in anti-competitive behavior when it bundled Windows Media Player with the Windows PC operating system and therefore required Microsoft to offer a Windows version without the Windows Media Player included.

Microsoft reacted by filing an application for annulment of the EC requirement in June of 2004, claiming that that the degree of interoperability for its work group software required by the Commission would essentially allow competitors to reproduce its products – a claim that was rejected by the court today. Also, on the Media Player issue, the court said that the facts that “that Microsoft does not charge a separate price for Windows Media Player, nor the fact that consumers are not obliged to use that media player, [are] relevant for the purposes of the examination of that factor. Combined with the conclusion that the bundling with Windows provided Microsoft an “unparalleled distribution advantage” over its competitors, the court found that “the remedy imposed by the Commission is proportionate.” The CFI upheld the requirement that Microsoft has to “make it possible for consumers to obtain the operating system without that media player, a measure which does not mean any change in Microsoft’s current technical practice other than the development of that version of Windows.”

Earlier today, Microsoft thanked the CFI for its consideration of this issue and noted that “the court has agreed with the Commission on a number of the Commission’s points”

“It’s clearly very important to us as a company that we comply with our obligations under European law. We’ll study this decision carefully, and if there are additional steps that we need to take in order to comply with it, we will take them,” said Brad Smith, Microsoft senior vice president and general counsel in a prepared statement. “It will take us a little bit of time, at least over the next few hours, to read the decision carefully, but certainly that is one of our strongest convictions as we go forward.”

However, Smith indicated that Microsoft is far from ready to be accepting the ruling and that the company will use the available appeal: “There’s obviously a lot of work that has gone into our efforts to comply with the Commission’s terms […]. We’ve made a lot of progress in that regard, and yet we all have to acknowledge that there are some issues that do remain open. As we read today’s decision more carefully, we’re hopeful that some
aspects of it may add some clarity that will help us all implement these remaining parts of the decision. And as I said, if we need to take additional steps in order to comply with today’s decision, we will do so.”

European Commissioner Neelie Kroes, on the other hand, was happy with the CFI ruling. “[The] decision set an important precedent in terms of the obligations of dominant companies to allow competition, in particular in high tech industries. 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.” Kroes stated that the success of this ruling could be measured by the development of Microsoft’s market share in the operating system market. The Commissioner hopes that the share will decrease significantly from the 95% the software has today.

Microsoft will have an opportunity to file for an appeal within the next two months.