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September 17, 2007

EU Court to Microsoft: You Lose

The European Court of First Instance rejected most all of Microsoft's objections to the European Commission's order and fine relating to the interoperability of third party clients to Windows.  The Court upheld the record fine of over half a million dollars and concluded that the Commission acted correctly on the tying of Windows Media Player to the operating system.

Microsoft had claimed that much of the information the Commission was forcing Microsoft to disclose to competitors amounted to giving up trade secrets, or materials that are patented or under copyright.  The Court agreed with the Commission that Microsoft mis-characterized the depth of information it was required to turn over to competitors.  In any event, Microsoft's dominant position in the market required more technical information than had been forthcoming.

The Court did side with Microsoft on having an independent trustee monitor its conduct.  The implementation was too open ended for the Court, and having Microsoft bear the costs was beyond the power of the Commission. 

Microsoft does have the option to appeal, but only on law, not factual issues.  That suggests a successful appeal to be unlikely.  The ruling is likely to affect other software giants as it confirms to the Commission broad powers to regulate competition.  Google is under fire for some of its privacy practices and some regulators have a dim view of Apple's iTunes store being closed to other devices or the iPod closed to other stores. 

Stories are in CNET, the Economist, and for the fun of it, AP via MSN Money

The opinion is on the Court's web site.  Use the search case law function to find it.  The English search page is here.

Update:  The Justice Department has, without surprise, issued a statement that criticizes the decision in the case.  Quoting Thomas O. Barnett, Assistant AG for Antitrust:

“In light of the United States’ own antitrust case and judgment against Microsoft, and the importance of the computer industry to consumers and to the global economy, the United States has a particular interest in today’s CFI decision. The decision is both lengthy and complex, as befits the importance and difficulty of the issues raised by the EC’s case against Microsoft. It will therefore be some time before the full impact of today’s decision on antitrust policy in Europe will be apparent. We are, however, concerned that the standard applied to unilateral conduct by the CFI, rather than helping consumers, may have the unfortunate consequence of harming consumers by chilling innovation and discouraging competition.

“In the United States, the antitrust laws are enforced to protect consumers by protecting competition, not competitors. In the absence of demonstrable consumer harm, all companies, including dominant firms, are encouraged to compete vigorously. U.S. courts recognize the potential benefits to consumers when a company, including a dominant company, makes unilateral business decisions, for example to add features to its popular products or license its intellectual property to rivals, or to refuse to do so."

I guess those Europeans have funny notions about competition and dominant companies.  Neelie Kroes,  EU Competition Commissioner, expects Microsoft's market share to drop as a result of the decision.  This may be too much to bear for Mr. Barnett, it seems.

September 17, 2007 | Permalink


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Or it could be that Mr. Barnett has a conception of anticompetitive conduct grounded in a bit more nuanced understanding of economic effect than the quaint notion of "big is bad." In fact, I think a lot of people besides Ms. Kroes' competitors at the US agencies would argue that the EU does have "funny notions about competition and dominant companies." I'd say a good several hundred thousand law review and economics journal pages have been written to flesh out that very notion. A little nod in the direction of the overwhelming academic criticism of notions like that esposed by Kroes would really help this blog post considerably. Full disclosure: I work at Microsoft. But let me assure you, I would have said precisely the same thing a year ago when I didn't.

Posted by: geoff | Sep 17, 2007 4:44:48 PM

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