Brussels, 24/03/2004 (Agence Europe) - The European Commission has made its decision: Microsoft has indeed broken European competition rules by abusing its quasi-monopoly on PC operating systems to weaken competition on the work group server operating systems and multimedia reader systems. The Commission has therefore imposed a series of fines, which Microsoft will have to pay off in order to re-establish competition, and fined the company 497 million EUR, the highest ever fine, because these were "very serious abuses, which have been ongoing for five and a half years".
The decision was taken following an extremely delicate and detailed investigation, which DG Competition has been working on for several years, and which has given rise to three statements of objections. Up until the last minute, Microsoft CEO Steve Ballmer and high-level staff tried to modify the Commission's position, which they feared would be harsh, but Mario Monti was not impressed by the world renown the American giant enjoys. "This is not a decision that we have taken lightly or hastily. It's a decision that follows a five-year investigation and intense debate within my department (...). The result is a decision which is proportionate to the market abuses we identified, and balanced", said the Commissioner, aware of the enormous media impact of the decision.
According to the Commission, Microsoft abused its market power by firstly deliberately limiting the interoperability between Windows PCs and its rivals' work group servers, and secondly, coupling the sale of is Windows Media Player with its operating system, which equips almost all of the world's PCs (95%). Work group servers are systems which provide services to office staff throughout the world in their management of daily tasks such as sharing files or printers, or security and user-identification management. Microsoft's abusive behaviour gave it a dominant position on this large market segment (these products are the lifeblood of company IT networks), with the risk of quite simply wiping out the competition. Microsoft's behaviour has also considerably weakened competition on the media player market. "This abuse slows down innovation and damages competition and consumers, who, at the end of the day, have less choice and have to pay higher prices", said the European Commission.
The Commission imposed the following corrective measures:
for interoperability, Microsoft has 120 days in which to divulge a full and specific document about Windows interfaces, to ensure total interoperability between rival work group servers and Windows PCs and servers. Microsoft's competitors will this be able to design interesting and efficient products as an alternative to Microsoft. Given the speed with which these products develop to become increasingly innovative, Microsoft will have to update this information each time it brings out a new version. "Under Community rules, refusing to divulge essential information can, in exceptional circumstances, force dominant companies to share information", said Mario Monti, who stressed that the existence of exceptional circumstances had been established, given the company's dominance. The Commission, which must make sure that the company is guaranteed the protection it can demand under intellectual property rights, stressed that Microsoft can request remuneration, which must remain reasonable and non-discriminatory. The information to be divulged relates only to documents on interfaces, and not the Windows source code, which is not necessarily needed to develop interoperable products, added the Commission;
on tying sales, Microsoft has 90 days to offer to PC manufacturers a version of its Windows operating system without the Windows Media Player. This corrective measure does not mean that consumers will end up without a media player. Manufacturers put together an operating system and a media player for their customers, explained the Commission. Due to this measure, they will no longer be obliged to sell a complete package imposed by Microsoft, but will be able to configure the product to consumer wishes, rather than a choice imposed by the American giant. However, Microsoft retains the right to offer a version of Windows with the Media Player (as a tied sale per se is not against the rules), but they will not be allowed to use procedures designed to make the untied version less attractive and less efficient. Nor will it be able to make discounts to its suppliers conditional on the tied version. According to data collected by the Commission, there is currently a clear trend in favour of the Microsoft Media Player and Windows Media technologies. If this domination was confirmed, there was a risk of the market tipping Microsoft's way definitively, with the consequence of the company's being able to control the related markets for digital media (coding technology, software to publish musical content on the Internet, management of digital rights etc).
The Commission also indicated that Wednesday's decisions would create a "precedent", in that the corrective measures it imposed would be clear principles for the behaviour for the company to adopt in the future, and also on how the Commission would treat similar cases in future.
Microsoft confirms that it will appeal
Soon after the decision was announced, Microsoft stated in a press release that it would appeal the decision before the European Court of First Instance. "We are convinced that the Commission's decision will restrict consumer choice, and harm European software developers", said Microsoft's legal director, Brad Smith. "We hope to resolve these differences as soon as possible", he said. Microsoft says that it has offered its rivals "unprecedented access to its technology". He also said that he had suggested selling three other rival sound and image reader software systems with the Windows system: "we acted responsibly while trying to create the best possible products to respond to our clients' needs", he said.
When asked about the probability of Microsoft's seeking legal redress, Commissioner Monti expressed his confidence: "We have been at pains to ensure the quality of the decision-making procedure. We have also developed an investigation system with many checks on it, to ensure that all parties' rights are respected". "The decision will hold water if appealed against, because we have evaluated all the risks", he concluded.