Still unanswered questions in EU decision

Interpretations differ on how the European Commission's decision will affect Microsoft, consumers and competitors.

Ina Fried Former Staff writer, CNET News
During her years at CNET News, Ina Fried changed beats several times, changed genders once, and covered both of the Pirates of Silicon Valley.
Ina Fried
4 min read
Wednesday's ruling from the European Commission cleared up some uncertainty about the punishment that will be levied on Microsoft for its alleged anticompetitive behavior in Europe. But considering the size of the fine and potential disruption to the company--and the PC market as a whole--the details were surprisingly sparse.

As of late Wednesday, the European Commission had issued only a summary of its decision. The result is that there may be different interpretations of how the decision will affect Microsoft, consumers and competitors. For example:

Q: If Microsoft is eventually forced to offer a separate version of Windows without a Media Player, what can it charge compared with the version that has the Media Player?
A: In its statement, the European Union said that Microsoft "must refrain from using any commercial, technological or contractual terms that would have the effect of rendering the unbundled version of Windows less attractive or performing." In particular, the commission said that Microsoft cannot give PC makers a discount for choosing the version with the Media Player.

Microsoft's interpretation is that it cannot charge more for the version without the Media Player, but it can charge the same for both. "They will cost exactly the same amount of money. One will do more, one will do less," Microsoft lawyer Brad Smith said. The commission did not spell out how it defined "less attractive."

What type of information regarding servers does Microsoft have to disclose, and how is that different than what the company is required to do under the U.S. consent decree?
In general, Microsoft said, the EU order goes beyond what the company already does in the United States. In particular, the U.S. agreement deals with allowing other companies' server software to connect to PCs running Windows.

Microsoft executives said the EU ruling also requires the company to allow rival servers to interoperate with its servers. Smith likened it to forcing a newspaper to share its articles with a rival. The European Commission stressed in its ruling that its order would not require Microsoft to share underlying source code, only the kind of hooks that would allow the servers to talk to one another. In any case, the company said it needs to see the final ruling to know what type of information it must share.

Does the ruling apply globally or only in Europe?
While Microsoft said the European Union's actions appear to be confined to its borders, attorneys for competitors have said the commission could theoretically try to apply the restrictions elsewhere in the world. The commission's statement Wednesday was not specific about geographical reach, however. Historically, Microsoft has tended to have one global business practice, so there is a chance that when all is said and done, any EU-mandated changes could be worldwide.

The European Union's sanctions against Microsoft are:

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The server aspect also could turn out to be more of a global issue. If Microsoft is forced to disclose information that makes it easier to connect with its servers, it is not clear how that would be limited to a geographic region.

What impact will the ruling have on future product development?
Microsoft CEO Steve Ballmer stated that the company is "not doing anything different than we were yesterday in terms of how we think about new design." That said, the company noted that it needs to better understand the EU ruling to know how it might affect future projects, including Longhorn, the upcoming version of Windows that will offer better searching capabilities along with a host of other new features. Microsoft said it already consults lawyers on its product development plans, so it is unclear whether the company will have to do anything different. The key question is whether the European Commission is applying a different standard to what types of features can be added to the operating system.

Could the EU decision spur other legal actions against Microsoft?
It's not yet clear what other legal actions may develop. As in the United States, the commission's five-year scrutiny and presumably detailed findings could serve as compelling evidence in private lawsuits against Microsoft. However, because Europe's court system does not encourage consumer class-action suits in the same way that the U.S. system does, experts say this type of follow-up is unlikely.

Private lawsuits from other companies are possible. Multimedia software company RealNetworks has said that it is focusing on its U.S. lawsuit for now, but it has not ruled out a similar suit in Europe. In a press conference Wednesday, Competition Commissioner Mario Monti specifically cited his ruling as an indirect deterrent to future Microsoft abuses "to the extent that the decision...may be used in the context of private actions against the company."

What about the EU's other pending investigations?
The commission's report gave no hint of what may be happening in regulators' other pending investigations into Microsoft. One of these stems at least in part from a grievance filed by the U.S.-based Computer and Communications Industry Association, which includes far-reaching complaints about the XP operating system extending Microsoft's power with new features. Other reports have noted that the commission is investigating Microsoft's contracts with PC makers.