Microsoft, EC prepare for antitrust ruling next week

BRUSSELS -- As judgment day in the nine-year-long antitrust battle between Microsoft Corp. and the European Commission draws near, neither side in the protracted dispute knows for sure how it will react to the news on the day.

Although the date of the ruling by the European Court of First Instance has been public since July, the European commissioner in charge of competition, Neelie Kroes, still hasn't decided whether she will hold a press conference on Monday.

Meanwhile, Tom Brookes, a Microsoft spokesman, said the company is waiting until Monday morning before finalizing plans for addressing the ranks of journalists from around the world gathering in Brussels and at the court in Luxembourg.

"How much can you prepare for an outcome you don't know?" Brookes said.

"Clearly, Mrs. Kroes isn't going to give a press conference if the commission loses outright," said EC spokesman Jonathan Todd.

On Monday, the court will make public its decision about Microsoft's appeal against the Commission's 2004 antitrust ruling. The case's outcome will influence the software industry's future and will be a reference in all future European antitrust cases, especially those in the fast-changing world of IT.

From Microsoft's perspective, it will determine "under what circumstances market-leading companies can improve their products for consumers," said Erich Andersen, vice president and associate general counsel for Microsoft in Europe, in a statement.

"The issue here is whether Microsoft should be able to regulate the market from a superdominant position, or whether the market should determine which products should gain access to consumers," countered Todd in a telephone interview.

Both sides also know that how the outcome is perceived in the press is almost as important as the actual outcome, which is likely to be hundreds of pages in length, devilishly nuanced and highly complex.

The ruling will be made public at 9:30 a.m. local time, and will probably focus on whether the Commission has to repay any or all of fine of €497 million ($685 million U.S.) it imposed on Microsoft in 2004.

Repaying the fine will be seen as evidence that Microsoft's appeal against the 2004 commission ruling was successful. Letting the fine stand will be viewed as a Microsoft loss.

But what happens to the fine is the least important aspect of Monday's ruling, according to Thomas Vinje, a partner at law firm Clifford Chance LLP who heads the legal team of the European Committee for Interoperable Systems (ECIS), a Commission ally.

"It's the least relevant yardstick," Vinje said. "Far more important is how the judges assess individual facts and points of law because this will determine what legal precedents can be gleaned from this case."

A senior lawyer on Microsoft's side agreed. "If the court reduces the fine on Microsoft, saying that the anticompetitive behavior isn't so serious, but upholds the commission's broad argument, then a lawyer in a year's time dealing with a different antitrust case will be more interested in what the court specifically said than in whether the fine was reduced or not," he said, asking not to be named.

Journalists will largely be dependent on lawyers' interpretations of the document, which won't come out until some time after the initial ruling. The story may well change dramatically during the day, once details of the ruling emerge.

Microsoft appealed both strands in the EC's landmark 2004 ruling, which concluded that Microsoft was abusing the dominant position of its Windows operating system to muscle in on other sectors of the software market.

The commission concluded that Microsoft was competing unfairly against other vendors by bundling its Media Player multimedia software in Windows. The EC also ruled that Microsoft monopolized the market for low-end server operating systems by failing to reveal interoperability information to rivals.

Last April, the court held a three-day hearing during which the commission and Microsoft, together with their software industry allies, tried to convince the judges of their arguments.

Observers foresee four possible outcomes on Monday, the first two clear-cut but unlikely, and the other two mixed and therefore more probable.

The court could side with the commission on both sides of the case. It might deem Microsoft an obstacle to innovation in the software industry and order the immediate breakup of the company, effectively appropriating the Windows operating system and making it a public utility.

In the second clear-cut but unlikely scenario, the court sides with Microsoft on both counts and declares that the rapidly changing IT industry is defined by a string of monopolies and that one monopoly is inevitably overtaken by another in time.

More likely, the court may side with the commission on the interoperability side but uphold Microsoft's appeal against the bundling ruling. Microsoft may be ordered to immediately release all interoperability information to rivals. This result would open up Office-related markets to open-source software rivals.

However, Microsoft would no longer need to sell a version of Windows without Media Player, and it would most probably bundle more features onto Windows in the future, to the likely detriment of any halfway successful innovation from a rival, such as Google Inc.

Alternatively, Microsoft may lose the bundling argument but win on the interoperability side. The court may order Microsoft to set up a separate company to sell a completely unbundled version of Windows. This entity would be free to compete with the fully bundled version and strike partnerships with other software developers.

If the third scenario prevails, then Microsoft could face a string of lawsuits in Europe. The commission is already examining an ECIS complaint that claims Microsoft has stifled competition in the market for office tools software by failing to allow rival software from interoperating properly with Microsoft Office.

"Victory on the interoperability side of the case on Monday would put wind in our sails," said the ECIS's Vinje.

But a loss would put a swift end to a new attack and any others that might await Monday's outcome. "Monday's ruling will have a huge effect on how the ECIS complaint is dealt with," Todd said.

Copyright © 2007 IDG Communications, Inc.

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