With the collapse of talks between the EU and Microsoft, the European Commission (EC) will next week announce a series of antitrust remedies and declare the company an abusive monopolist – setting a precedent that will make similar prosecutions easier.
Microsoft plans to appeal, and with the other antitrust inquiries into Microsoft business practices going on, the company may be dealing with Europe for years.
European Competition Commissioner Mario Monti said yesterday: "The public and competition would therefore be better served by a decision setting a strong legal precedent which establishes clear principles for a company that is so dominant in the market," he said
Sun Microsystems, RealNetworks and the Computer & Communications Industry Association (CCIA), all said they look forward to a strong decision condemning Microsoft.
"Unfortunately, in and of itself, this ruling won't rein-in Microsoft. However, it lays a foundation for other measures that could," said CCIA president and CEO Ed Black. "This ruling will set an important precedent. The fact that (Monti) is putting a high value on the precedent means that the Commission intends to use it."
The CCIA filed a broad complaint against Microsoft with the Commission in February last year. A ruling against Microsoft next week would help the CCIA's case, Black said. "With formal precedents established and rulings made, it makes it a lot easier to accelerate other complaints," he said.
Europe is expected to force Microsoft to sell two versions of Windows to PC makers in Europe: one with Media Player and one without. The Commission is also expected to require Microsoft to share some Windows code with rivals. Europe will also fine Microsoft between €100 million and €1 billion.
Microsoft's general counsel, Brad Smith, said the company will appeal the expected ruling but declined to say whether it would ask for a stay on the remedies until the appeal is resolved.
Settlement talks broke down over Monti's demand that Microsoft sign a pledge to not abuse the dominance of Windows in the future by bundling in separate software products to thwart competitors, according to sources.
Microsoft nemesis Sun said in a statement that it is "encouraged" by the Commission's decision not to settle the matter, but to come out with an official ruling.
"A decision by the Commission is important as it will establish the legal principles that will apply to current and future generations of Microsoft technology," Lee Patch, Sun’s vice president of legal affairs, said in the statement. A strong decision will improve competition and consumer choice, he said. Sun is also pursuing its own antitrust case against Microsoft in the US.
RealNetworks supports a decision that would give PC makers, enterprises and consumers a choice of media players. "It's time to restore fair competition to digital media through an effective remedy that addresses Microsoft's illegal tying," of media software with Windows, the company said.
Sources close to the European case said that the Commission was prepared to allow Microsoft to avoid an admission that it had abused the dominance of Windows, and reach a settlement, as long as it signed a legally binding commitment on future business practices.
But there is more at stake than an admission on Microsoft's part. The EU regulator, as well as Microsoft rivals, indicated that the EU's expected ruling against Microsoft will make it easier to prosecute other antitrust-related cases.
"Other cases (against Microsoft) that exist or are on the horizon (bear) remarkable similarities to issues raised in the current antitrust case due to conclude next Wednesday," Monti said.
Not over yet
Several separate antitrust inquiries in Europe are already underway.
The complaint lodged in February 2003 by the CCIA sparked an inquiry into whether Microsoft is using the Windows XP operating system to push into new markets. The CCIA accuses Microsoft of unfairly competing in areas including software for email, instant messaging and audio and video streaming and playback by bundling software with Windows XP.
The CCIA also charges Microsoft with taking unfair advantage of the ubiquity of its operating system software to establish itself in Internet-related markets and markets for software for mobile phones and handheld computers, server applications and server software.
In another inquiry, the European Commission has also been contacting hardware manufacturers about Microsoft's licensing policy, acting in response to companies that have expressed concern about certain conditions that Microsoft attaches to the licensing of its Windows operating system.
The current case, to be ruled on Wednesday, is itself the result of several investigations into Microsoft business practices by the Commission. The first inquiry was launched after a 1998 complaint from Sun, which charged that Microsoft was giving its own server software an advantage over competitors' products by withholding information about Windows from them.
In February 2000, the Commission launched a separate investigation to check whether Microsoft was doing the same thing with Windows 2000, which at the time was new. In August 2001, the EU regulator announced that it was merging the 1998 and 2000 cases because they were similar.
By 2002, the EU had broadened the scope of the case to incorporate what it termed "middleware," which included Windows Media Player.
Paul Meller in Brussels contributed to this story.