E.U. Court Rejects Microsoft's Appeal

By Molly Moore
Washington Post Foreign Service
Tuesday, September 18, 2007

PARIS, Sept. 17 -- A European Union court ruled Monday that Microsoft must share software information with rivals and pay a record $690 million in fines for quashing competition from smaller companies.

Consumer advocates and Microsoft officials said the decision, by the European Court of First Instance, would have far-reaching implications for technology companies and other industries around the world.

Neelie Kroes, the European competition commissioner, who led the effort to force Microsoft to share technology and give consumers more than one option, said the decision "set an important precedent in terms of the obligations of dominant companies to allow competition, in particular in high-tech industries."

Brad Smith, Microsoft's general counsel, called the ruling "disappointing" but added that the software giant was "committed to complying with every aspect" of the decision.

The court, based in Luxembourg, wrote that it agreed with E.U. regulators who said in 2004 that Microsoft had "abused its dominant position" in the global software marketplace by stifling competition and undercutting innovation efforts by rivals, thus keeping operating-system prices excessively high. Microsoft had appealed that decision to the court.

Although Smith said the company had not decided whether to appeal Monday's ruling, he appeared more resigned and conciliatory toward European regulators than in the past, when Microsoft accused them of trying to force the company to divulge product information it had developed at great expense.

Smith, speaking at a news conference in Brussels that was carried on Microsoft's Web site, said the decision "very clearly gives the commission quite broad power and quite broad discretion."

Although the commission's demands cannot be enforced outside Europe, Smith said, the implications of the case will affect "our industry and every other industry in the world."

The E.U. had ruled that Microsoft used its near-monopoly on operating systems for desktop computers to compel consumers to buy its other software, such as Media Player, which allows users to access audio and video via the Internet. The appeals court agreed with the E.U.

Kroes said Microsoft's efforts "hurt consumers and dampened innovation." She added that "in a world where 95 percent of PCs run Windows," Microsoft's abuse of its dominant market position makes it difficult for computer users to share printers or documents unless they use Microsoft products. As a result, she said, smaller companies found it virtually impossible to break into the market.

Smith said that since the 2004 decision, Microsoft had entered license-sharing agreements with other companies. But he added that Monday's ruling made it clear that the company needed to do more.

"This decision will have global impact," said Ken Wasch, president of the Software & Information Industry Association, a Washington trade group that supported the European antitrust case. "Interoperability won't just apply to Europe. . . . If companies make their product plug and play better with Microsoft products, that'll happen across the globe."

The European case began in 1998 as part of the effort by regulators across the Atlantic to more strictly control "dominant businesses." Though similar in some ways to the antitrust case pursued against Microsoft by the U.S. Justice Department, the case put Europe at odds with other American companies and some computer trade groups that argue that European regulators are infringing intellectual-property rights and stifling innovation.

French officials, for example, have demanded that Apple make the iPod's system more compatible with other music players, and German authorities have investigated some of Intel's practices. The E.U. commission's fines against Microsoft are in addition to hundreds of millions of dollars in other European fines for failure to comply with the 2004 ruling and provide the technical data other companies need to make their software compatible with Windows systems.

But the case has also highlighted Microsoft's enduring market position even in the face of antitrust challenges. The company's operating system remains by far the most widespread in offices and homes around the world, despite efforts by competitors like Linux and IBM to create alternative computer operating platforms.

Microsoft officials said that the company has been selling an alternative version of Windows without the Media Player, as demanded by the European Commission, but that few have been purchased.

Staff writer Howard Schneider in Washington contributed to this report.

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