EU antitrust power in balance on Microsoft decision

Upcoming court decision on merits of European Commission rulings against Microsoft could challenge EC's authority.

When a European court hands down its landmark Microsoft antitrust decision next Monday, at stake will be nothing less than the power of the European Commission to regulate the high-tech industry.

The decision by the 13-judge Grand Chamber of the Court of First Instance in Luxembourg will determine whether the European Union's executive arm ruled properly in 2004 that Microsoft used its near-monopoly Windows system to push rivals out of the marketplace. Competitive products must perch on that platform.

Companies around the world are waiting for a decision that could cut into the Commission's power, as it considers antitrust cases and complaints involving Microsoft, Intel, Qualcomm, Rambus and others.

"If we lose this one, we're in deep (trouble). It would put in question our ability to regulate competition in high-tech industries," a Commission official said.

The Commission held that Microsoft skewed the scales by taking advantage of the fact that more than 95 percent of the world's laptops and desktops run on Windows. Microsoft says the EU executive is interfering with its ability to design software.

The European Union judges have taken an agonizing 15 months to decide the case since they conducted public hearings, leading to speculation the verdict may be long, complex and nuanced.

Most obviously, the court will decide whether to slice the Commission-imposed a record $685.4 million fine.

But that is pocket money to Microsoft.

Both sides care far more about sanctions the Commission ordered on Microsoft's business practices in two major areas.

One part of the decision involves streaming media software used to watch Google's YouTube, download Apple iTunes or listen to Webcasts.

RealNetworks' RealPlayer once dominated the field. The Commission found Microsoft illegally built its own Windows Media Player into every copy of Windows sold in order to disadvantage companies such as Real.

Real won a $761 million settlement from Microsoft in a U.S. case involving the same issue in 2005. The Commission ordered Microsoft to sell an additional version of Windows without Media Player, which the company did. Almost no one bought it.

The court could endorse that order, or it may throw out the remedy, giving Microsoft a partial win. It could go yet further by throwing out the remedy and telling the Commission it was mistaken to tell Microsoft how to design software, cutting the heart out of Commission authority.

A second aspect of the case covers connections between desktops and central computers, called servers, used to print documents, access files and sign on.

It used to be that Microsoft did not build servers, but gave outside server producers the information they needed to connect with Windows. Microsoft eventually entered the server market.

After that, rivals complained that when Microsoft offered new versions of its operating system, it stopped providing information they needed to interconnect. Microsoft's market share jumped and big competitors quit, the Commission found.

The Commission ordered Microsoft to make better interconnect information available. It says Microsoft has yet to comply adequately and fined it an additional $384.2 million.

Microsoft says it spent vast resources to comply but that the Commission has never given it clear instructions.

"At issue are whether companies can improve their products by developing new features, and whether a successful company must hand over its valuable intellectual property to competitors," Microsoft has argued.

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