Antitrust Tide Turns Against Microsoft

The reviews are in on the latest developments in the never-ending Microsoft antitrust saga, and the European Union's decision to go for tough penalties doesn't look good for Gates and Co.

"The fact that the EU has stood up to Microsoft and is seeking a fairly strong remedy and possibly heavy fines will have an indeterminate but significant impact on future antitrust proceedings in the U.S.," Warren Grimes, a professor at Southwestern University School of Law in Los Angeles, told The Seattle Times.
• The Seattle Times: Europe Closes In On Microsoft

"It's unlikely Microsoft is going to get out of it now," antitrust lawyer Davina Garrod of McDermott, Will & Emery's London office told The Los Angeles Times.
• The Los Angeles Times: Europe Votes For Microsoft Sanctions (Registration required)

The EU member nations' unanimous backing of a get-tough approach to Microsoft sets the stage for a potentially massive fine. "All that remains is for [Mario Monti], the European Union's commissioner for competition, and his senior officials to determine the size of the fine to impose on the company. The commission can fine a company as much as 10 percent of its global annual sales, in Microsoft's case around $3 billion. People close to the case said the fine might range from 100 million euros to a billion euros -- $123 million to $1.23 billion at current exchange rates," The New York Times reported. The Los Angeles Times said "penalties, likely to include substantial fines, would be the harshest so far faced by Microsoft, which has defended its business practices for years against antitrust litigation brought by competitors, customers and governments."
• The New York Times: European Regulators Back Proposed Microsoft Ruling (Registration required)

The Washington Post noted the EU decision to approve a draft set of penalties "is a blow to Microsoft, whose representatives have been actively lobbying EU members for months, hoping to avert a ruling that would force the company to change the architecture of its operating system. The sanctions, likely to include fines, would be the harshest imposed on the software giant, which has been fighting legal battles for several years on both sides of the Atlantic."
• The Washington Post: EU Likely To Order Microsoft To Unbundle (Registration required)

More from The New York Times on what the EU has in the cards: European regulators are "also expected to order the company to disclose enough Windows code to rivals so they can design software that works smoothly with Windows. That provision is intended to restore competition in the market for server software. Servers link personal computers into networks. The provision concerning Media Player is considered the harder of the two to settle because it questions an essential part of Microsoft's business model that has allowed it to develop highly successful programs like the word-processing package Word and the Outlook e-mail program." According to The Wall Street Journal, "The first remedy probably would apply only to Europe, while the second could result in improved compatibility between Windows-based and non-Windows-based computers world-wide."
• The Wall Street Journal: EU Backs Plans To Punish Microsoft (Subscription required)

The San Jose Mercury News reported that "[i]f the draft decision is adopted next week, the European Commission could do something no other government has done so far: limit Microsoft's ability to bundle new technologies with its ubiquitous Windows operating system. Tying key technologies to Windows, such as the Web browser and media-player software, to Windows has been a fundamental business strategy for Microsoft. Limiting that ability could undermine Microsoft's chances of dominating nascent markets in the future."
• The San Jose Mercury News: Microsoft Antitrust Remedy Approved

But don't expect Microsoft to change its ways. San Diego-based antitrust attorney Jeffrey M. Shohet "said it is questionable whether this ruling will deter Microsoft from its bundling strategy," The Washington Post reported. "This is a major battleground for Microsoft, and they won't give it up easily," Shohet said. "They see it as very strategic and critical for the dominance of their operating system."

Nonetheless, it likely that Microsoft rivals would gain if the EU forces Microsoft to unbundle its media software. "It will immediately restore some competition and encourage makers of media players and other software that works with Windows to go out and develop products," Howard University law professor Andrew Gavil told The San Jose Mercury News. "Software developers are inhibited from investing time and energy to create such products because of fear that Windows will absorb them and destroy them," he said.

Trouble In Minnesota

Meanwhile, Microsoft is dealing with yet another lawsuit alleging that the company is overcharging for its products.