FAQ: EU smacks down Microsoft

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

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What's next? Smith was anything but confrontational in his news conference minutes after the decision. "We are 100% committed to complying with every aspect of the Commission's decision," he said. How that happens, however, particularly with regard to the protocols that Microsoft must offer rivals, is still somewhat up in the air. During his news conference, Smith noted that there were "a couple of issues that need to be sorted out," and listed them as the licensing pricing and the protection of trade secrets. Microsoft and the Commission have butted heads repeatedly over the protocols, resulting in additional fines levied by the antitrust regulators.

What's this I heard about Congress jumping into the fray? You heard right. Hours after the Court issued its decision, Rep. Robert Wexler, (D-Fla.), announced that he would hold a hearing in the subcommittee he chairs in the House Committee of Foreign Affairs on the ruling. "The European Court decision today sets a dangerous precedent and will have a dramatic impact on US-EU economic relations," Wexler said in a statement. "I am concerned that American high tech companies, including Microsoft, are being unfairly targeted by zealous European Commission regulators."

What does this mean for me, Average Windows User? That's hard to pin down with certainty, but some things seem clearer now. What won't change are the remedies Microsoft's already applied in the EU. The company must continue to sell separate versions of Windows in the EU that have been stripped of Media Player, for example. And it must deliver the protocols necessary for rivals to write server software that works with Windows. Undoubtedly, today's ruling will put more pressure on Microsoft to agree to the Commission's demands for more information on the protocols, and to reduce the licensing fees for those protocols.

Down the road, however, changes may continue to be asked of Microsoft, and perhaps other technology companies as well.

Talk of a chilling effect on bundling started to circulate even before today's decision, and gathered steam after the fact. "We haven't heard the last of the legal challenges to Microsoft's bundling practices by any means," Herbert Hovenkamp, an expert on antitrust law at the University of Iowa College of Law, told the The New York Times this morning.

In addition, the outstanding complaint made last year by a group backed by IBM Corp. might now be shoved to the forefront. The group charged in February 2006 that Microsoft had stymied competition to its Office suite with its proprietary document formats.

Even before the Court's ruling today, however, pressure from rivals had been sufficient to get the company to announced changes to Windows Vista. Although complaints to the Commission last year about Vista's PatchGuard technology did not result in any former action by the EU, it did push Microsoft to promise APIs (application programming interfaces) that will allow security developers limited access to information going into the kernel. And like regulators in the U.S., the Commission questioned Vista's search features after Google grumbled. In the latter case, Microsoft made concessions that will be implemented in Vista Service Pack 1 (SP1).

Some analysts have also warned that the affirmation by the Court will embolden the Commission to make new charges of market dominance against the likes of Apple Inc. or Google Inc., which own the bulk of Europe's digital music and Web search business, respectively.

Who might be next on the Commission's list? Apple. On Wednesday and Thursday, the Commission will hold hearings into iTunes' pricing. This is the follow-up to the Commission's April accusations, when it said Apple and the four biggest record labels charged customers in different EU countries different prices for digital music.

Copyright © 2007 IDG Communications, Inc.

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