EU Upholds Microsoft Sanctions

[DudeAsInCool]

December 22, 2004, 5:40 AM PST

By Dawn Kawamoto and Ina Fried

Staff Writer, CNET News.com

A European court on Wednesday dealt a blow to Microsoft, ordering the company to start offering a version of Windows without a bundled-in media player.

Read the full story here:

http://news.com.com/EU+upholds+penalties+a...l?tag=nefd.lede

[DudeAsInCool]

European Court Rules Against Microsoft on Windows

By TERENCE NEILAN and STEVE LOHR

Published: December 22, 2004

Microsoft Corporation lost a major appeal today in a European court, which ruled that the world's largest software company must comply with sanctions imposed by regulators and strip features from its Windows product.

It must also share information about its products with other software companies and pay a $665.4 million fine imposed by the European Commission in March, when it found that Microsoft had abused its virtual monopoly of desktop operating software.

"Microsoft has not demonstrated specifically that it might suffer serious and irreparable damage," said Bo Vesterdorf, the president of the Court of First Instance in Luxembourg, which handed down today's ruling.

Mr. Vesterdorf added in the 91-page ruling that Microsoft's request to delay the commission measures pending an appeal was "dismissed in its entirety."

The immediate impact of the ruling is uncertain. But it may well open the door to continuing legal challenges, both in Europe and elsewhere, to Microsoft's business strategy of adding more and more products and features to its Windows operating system. More than 90 percent of the personal computers in the world run Windows.

Under the ruling, Microsoft must sell to computer makers a version of Windows without its Media Player software for playing music, movies and video clips sent over the Internet on personal computers.

The commission ruled in March that Microsoft bundled Media Player with Windows in order to damage audiovisual rivals like Real Player and Apple Computer Inc.'s QuickTime. Personal computer makers can offer those alternatives already, but until now they could not sell Windows without Microsoft's Media Player. That choice can now be made by PC makers in the European market; a version of Windows without its Media Player could be available in the European market within two months.

Whether PC makers will widely offer the stripped-down Windows is unclear. Microsoft has said it will offer the two versions of Windows at the same price.

Microsoft has made a number of settlements with rival companies, which make the $665 million fine levied by the commission pale by comparison. Microsoft had already paid that money into an escrow account, after the commission ruled against it last spring.

The Computer and Communications Industry Association,Novell, RealNetworks, Sun Microsystems and Time Warner all accused Microsoft of using its dominant position in the operating system market to give it an illegal advantage in other markets. All but one of those, RealNetworks, settled with Microsoft this year.

It was Microsoft's settlement in April with Sun, a longtime adversary, that was the most indicative signal of its new approach to regulatory affairs. In a broad agreement between the two companies, Microsoft agreed to pay Sun nearly $2 billion, including $700 million to resolve antitrust issues.

Microsoft stock opened on the Nasdaq market today 24 cents down, or .89 percent, at $26.83.

Jonathan Zuck, the president of the Association for Competitive Technology, which intervened in the case in support of Microsoft, said in a statement: "Today's decision will have dangerous repercussions for small software developers, consumers and the future of innovation.

"While intended to constrain Microsoft, the commission's sanctions will impose billions of dollars in new costs on small software developers and consumers, and threaten the future of innovation."

Goldman Sachs, which does some work for Microsoft, said in a statement that it believed the decision itself was not harmful to Microsoft's business, but that it set a precedent under which the commission could argue that "future enhancements to the operating system such as search or antivirus must similarly be unbundled." It was the precedent that was "really at issue," the statement said.

Although today's ruling came down squarely against Microsoft, the company, based in Redmond, Wash., could still appeal to the European Court of Justice, although a legal expert on European business competition, Vincent Brophy, said in a telephone interview today that he had doubts that the decision would be overturned.

"I think for Microsoft it's very bad news," said Mr. Brophy, speaking from the Brussels office of the international law firm Jones Day. "It creates serious problems in terms of marketing."

He added: "It's very unusual to say to any company you cannot sell products in the way you want to sell them. You have to unpackage your products, which is exactly what the commission is doing."

A statement from Microsoft today put a positive face on the order, saying "we are encouraged by a number of aspects of the court's discussion of the merits of the case."

It added: "While the court did not find immediate irreparable harm from the commission's proposed remedies, the court recognized that some of our arguments on the merits of the case are well-founded and may ultimately carry the day when the substantive issues are resolved in the full appeal.

"While we had hoped that the court would suspend some or all of the remedies in the case, we are encouraged that the court has recognized that Microsoft has a number of powerful arguments that must be considered in the full appeal."

The European director of public policy for the Computing Technology Industry Association, Hugo Luders, called today's ruling "discouraging news" for the computer industry in Europe and consumers around the world.

Mr. Luders, in a statement issued in Brussels, said information technology companies "will be less willing to innovate, fearing that their intellectual property will be appropriated by government intrusion into the marketplace."

Copyright 2004 The New York Times Company

http://www.nytimes.com/2004/12/22/technolo...artner=homepage

[Shawn]

Jonathan Zuck, the president of the Association for Competitive Technology, which intervened in the case in support of Microsoft, said in a statement: "Today's decision will have dangerous repercussions for small software developers, consumers and the future of innovation.

That has to be a dummy lobby like Flynt's "Free Speech Coalition", no?

[Malicious Intent]

The commission ruled in March that Microsoft bundled Media Player with Windows in order to damage audiovisual rivals like Real Player and Apple Computer Inc.'s QuickTime. Personal computer makers can offer those alternatives already, but until now they could not sell Windows without Microsoft's Media Player. That choice can now be made by PC makers in the European market; a version of Windows without its Media Player could be available in the European market within two months.

The destruction of Quicktime and Real is something I am all for!