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E.U. Orders Microsoft To Modify Windows

One Version Must Omit Media Player

By Jonathan Krim
Washington Post Staff Writer
Thursday, December 23, 2004; Page A01

Microsoft Corp. will for the first time be forced by antitrust regulators to change how it designs and sells its widely used Windows computer operating system, after a European Union judge yesterday rejected the company's bid to postpone sanctions against it.

Bo Vesterdorf, chief judge of Europe's second-highest court, ruled that the company failed to prove it would suffer irreparable harm if it were forced to modify its software before it exhausts its appeals, a legal process that could take years.

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The decision means the company must create two versions of Windows for the European market. One version will include programs for playing digital music and video and one will not. E.U. antitrust officials hope that will give rival makers of media-playing software a better chance to compete for prominence on Windows-based computers.

The stripped-down version, which Microsoft said would have little value to consumers because it would not work as well as the full-featured package, will not be sold outside Europe.

But E.U. officials said the ruling sent an important message that antitrust enforcement needs to be vigilant and should not be delayed, "in particular in fast-moving markets as in this case."

The ruling is at least a temporary blow to the core business strategy that has helped Microsoft to overwhelming dominance: bundling more and more functions, such as those for playing digital media or browsing the Web, into the Windows operating system that runs 90 percent of the world's personal computers.

With a ruling, released in March, that bundling the media player was illegal, E.U. authorities took a starkly different path from that of U.S. courts and regulators, which have generally allowed companies to add features to their products that benefit consumers. As a result, Microsoft now faces different regulations in different parts of the world.

The E.U. also found that Microsoft illegally withheld key software code from competing developers of server systems, the machines that control computer networks, so they would not work properly with Windows systems.

Microsoft was ordered to license certain server code and to pay the largest antitrust fine in history, more than $600 million.

In yesterday's ruling, Vesterdorf was careful not to disparage the merits of Microsoft's appeal on the bundling and server issues. The ruling addressed only the question of whether the sanctions should be postponed until an appeal is heard.

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