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FAQ: EU smacks down Microsoft

The company's legal counsel called the decision 'a disappointing one for Microsoft'

September 17, 2007 12:00 PM ET

Computerworld - As the long-awaited decision on Microsoft's appeal of the 2004 antitrust ruling in the European Union was handed down today, headlines used phrases ranging from "stinging" to "stunning" to describe the American company's legal defeat. But with the ruling weighing in at 200-plus pages, we need a Cliff Notes version, a just-the-FAQs edition. What happened today, and what does it mean? Some of the opening-hours answers follow.

What did the EU court do today? The Court of First Instance rejected Microsoft's appeal, and confirmed both of the behaviors the European Union's Competition Commission said were illegal. The first problem, the Commission said in its 2004 judgment, was bundling, or "tying," Windows Media Player to the operating system. The second -- and the issue that has caused virtually all the contention between regulators and the U.S. company -- is that Microsoft used the dominance of Windows on the desktop to jack up its share of the server software market. The Court said the Commission's moves were correct in both cases.

The Court also reaffirmed the $613 million fine the Commission originally slapped on Microsoft, saying today that "the Commission did not err in assessing the gravity and duration of the infringement and did not err in setting the amount of the fine."

I'm a sports fan. Who won, who lost?

Although experts and analysts thought last week that it might take days to shake out an answer to those questions, it took just minutes. Microsoft's general counsel, Brad Smith, clearly saw it as a major loss by Microsoft. "The decision is a disappointing one for Microsoft," Smith said in a news conference held shortly after the Court rejected the appeal.

Neelie Kroes, the EU's chief antitrust regulator, saw it the same way. "The Court ruling shows that the Commission was right," she said in a statement. "Microsoft must now comply fully with its legal obligations to desist from engaging in anti-competitive conduct."

If you're keeping score at home, it's EU 1, Microsoft 0.

When did this start? Today's ruling can be traced back to August 2000, when the European Union's Competition Commission filed its first "Statement of Objections," or official complaint, against Microsoft. The first of five (so far), that complaint accused Microsoft of withholding technical information that would have let other server operating system developers make their products interoperate with Windows clients. The actual ruling at issue today, however, stems from the decision handed down March 24, 2004, when the Commission ordered Microsoft to pay a $613 million fine, sell a version of Windows without Media Player and provide rivals with the information they needed to make their server software run more smoothly with Windows.

How long has the Court had this case? The day the Commission announced its ruling and fine, Microsoft said it would ask the Court to stay some of the Commissions sanctions pending an appeal. "I do expect that we'll ask the court to suspend the part of the order that would require us to produce a second version of Windows that has the Media Player code stripped out of it," Microsoft's general counsel Brad Smith said at the time.

It wasn't until June 7, 2004, however, that Microsoft filed its appeal with the Court, and nearly three weeks later -- June 27 -- that it officially asked the Court to suspend the Commission's orders pending appeal.

The Court held two days of hearings on the stay request on Sept. 30 and Oct. 1, 2004. A little less than three months later -- on Dec. 22 -- the Court ruled against Microsoft, telling it to toe the Commission's line, appeal notwithstanding. Microsoft had not proved that complying with the sanctions would cause "serious and irreparable harm" to its business, the court said.

During a week-long session April 24-28, 2006, the Court of First Instance listened to arguments from lawyers representing both Microsoft and the Commission. Then, on July 17, the Court announced it would issue its decision today, Sept. 17.

Will this be the end of it? Either party can appeal to the European Court of Justice, the EU's highest court, but only on orders of law. As of mid-day Monday, Microsoft had not said whether it would file such an appeal. "We just need to think about this," said Smith said today. "It's a serious and substantial decision and it deserves serious thought rather than an instantaneous decision."



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