Microsoft Loses EU Antitrust Appeal

Over three years after antitrust regulators in the European Union (EU) handed Microsoft a stunning legal defeat, the company has lost its appeal in sweeping fashion. This morning, the Court of First Instance in Luxembourg issued a long-awaited ruling on Microsoft's appeal of the case, a decision that almost fully supports the terms of the original EU ruling and requires Microsoft to pay a record $600 million fine.

The Court has upheld all of the meaningful parts of the original EU ruling against Microsoft, which found that the software had "abused its dominant position" in the market. The Court agreed that Microsoft had illegally bundled a media player in Windows and that the EC was correct in ordering Microsoft to sell a Windows version without it. The Court also found that Microsoft was "abusive" in refusing to supply partners and competitors with interoperability information for its workgroup server products, and that Microsoft's complaints about the EC remedy were spurious: Competitors could not use this information to clone Microsoft products, as the company had claimed on appeal.

The Court also supported the EC's fine, noting that "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." Microsoft won only one small point, that the outside monitoring trustee assigned by the EC to oversee technical aspects of the case was given too much time and access to private Microsoft resources. The Court ruled, essentially, that Microsoft would no longer have to bear the financial burden of a monitoring trustee.

With the ruling coming as it did in the early hours of Monday morning--just after midnight back at Microsoft's Redmond campus--the company was still reeling from the decision and trying to figure out an appropriate response. "It's clearly very important to us as a company that we comply with our obligations under European law," Microsoft general counsel Brad Smith said from Luxembourg, where he was awaiting the ruling. "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."

Smith says that Microsoft has been working since 2004 to comply with the EU antitrust ruling, though the company has yet to fully comply with one major aspect of the ruling, which requires Microsoft to provide technical documentation about server interoperability to competitors that choose to license it. Microsoft did ship versions of Windows XP and Vista that do not include a bundled version of Windows Media Player, as required by the ruling, but those products have sold poorly. According to Smith, Vista is in compliance with the 2004 antitrust ruling already.

Regulators at the European Commission (EC), which brought the original case against Microsoft and have been fighting to ensure that the company complies, were less demure in their assessment of the ruling. "This judgment confirms the objectivity and the credibility of the Commission's competition policy," EC president José Manuel Barroso said. "This policy protects the European consumer interest and ensures fair competition between businesses," "This is a great day for European businesses and consumers," agreed European Committee for Interoperable Systems (ECIS) lawyer Thomas Vinje, whose organization supported the EC during the case.

For now, Microsoft says it needs time to more closely study the ruling so that it can determine its next steps. Most likely, the software giant will take advantage of its final possible appeal of the case, to the European Court of Justice, Europe's highest court.

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