Brussels, 13/09/2007 (Agence Europe) - The judges of the Court of Justice of the European Communities are preparing to deliver, on Monday 17 September, a long-awaited verdict of great significance for European Commission competition policy. The case, which is one of the most complex and far-reaching of the Court's history, is between the American IT giant, Microsoft, and the Commission, after the American company was found guilty of anti-trust offences in 2004.
The chain of events
The story began almost ten years ago on 10 December 1998 when a complaint was lodged with the Commission by Sun Microsystems, a rival of Microsoft on the server market, against Microsoft's refusal to provide it with information that was apparently necessary to ensure interoperability between the servers of both companies. In three statements of grievances in 2000, 2001 and 2003, the European Commission suggested remedies not only for the interoperability problems of the servers but also for the controversial inclusion of the Windows Media Player. In March 2004, when the parties were close to reaching an amicable solution, the Directorate General under Mario Monti, the Competition Commissioner at the time, decided to penalise Microsoft in the two areas covered by the dossier, imposing a fine of €497 million upon it. According to some observers, the Commission's decision to stop negotiation had been motivated by the desire to create a precedent that would be firmer than a friendly agreement. The formal condemnation of Microsoft was to lay the foundations for further development in the Community regulations on antitrust offences. In June 2004, Microsoft appealed against this decision before the EU Court of First Instance. In December 2005, July 2006 and again in March 2007, the Commission reproached Microsoft for failing to give an appropriate response and threatened it with additional fines (Microsoft had already paid the 2004 fine in July that same year). The Court of First Instance is to rule on Monday on the substance of the March 2004 decision, while Microsoft's responses in the meantime are still being assessed by the Commission.
Abuse of dominant position
Microsoft is accused of two quite separate offences. On one hand, the Commission considers that inclusion of the Windows Media Player software in the Windows operation manager system made market access difficult for manufacturers of competing software and was therefore in breach of the provisions of the EC Treaty. Microsoft's answer to this was that it simply made improvements to the operations system, and does not understand how this additional function could be a separate product. The company does not share the Commission's view, either, that the operations system (or “platforms”) market is separate from that of Media Players. “Just because some companies sell laces without shoes does not mean that others should be forced to sell some shoes without laces”, said Lars Liebeler, a lawyer from the Linklaters firm in Brussels defending Microsoft in this case. Also, Microsoft stresses the low demand for the Windows version without the Media Player, which is marketed in line with Commission requirements (fewer than 2,000 licenses sold in 2 years). It should be noted in passing that this lack of passion for the product could also be attributed to the fact that there was no price advantage compared to the “complete” version. Jean-François Bellis, whose law firm Van Bael and Bellis represents Microsoft on the Media Player chapter, points out that the Commission had never demanded that the versions without Media Player be less expensive, simply that the price should not exceed that of the “complete” version.
When it comes to the interoperability of the server software, Microsoft is accused of having made it difficult and/or costly to create software for servers that are compatible with that of Windows. Given the latter's dominance, it being used almost as a reference in the IT industry, the Commission stresses that certain obligations are incumbent upon Microsoft towards its competitors - especially that the necessary technical information should be readily accessible at an affordable price. As smaller companies are not under such an obligation, Microsoft takes the view that it has been punished simply for having been successful on the market. According to Microsoft, depriving it of its intellectual property in this way would discourage any future investment in innovation. The Commission, however, wonders to what extent the information required is truly likely to be protected by intellectual property law, given its lack of innovative content (EUROPE 9377).
On both these issues, Microsoft explains that competition does not seem to have been injured, as there are a large number of products to rival the Media Player, and that no clients have complained of interoperability problems. The Commission, however, does not state that competition is impossible - simply that it is not as free as it could have been. In its 2004 decision, it supports its argument with an in-depth market analysis carried out in collaboration with the independent institution, International Data Corporation. It is on the basis of this analysis that it noted the adverse effects of Microsoft's behaviour on competition (those who enjoy getting into the nitty gritty of the matter will find the whole study between paragraphs 590 and 665 of the verdict, available at: http: //ec.europa.eu/comm/competition/antitrust/cases/decisions/37792/en.pdf).
It is more than likely that the losing party will initiate an appeal with the Court of Justice within two months. If the Court of First Instance rules in favour of Microsoft on certain points and comes into line with the Commission's stance on others, both parties may each challenge elements of the judgement. The affair seems far from closed. (cd)