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Monday, September 17, 2007
EU Court Crushes Microsoft's Antitrust Appeal

A European Union court upheld a landmark 2004 European Commission antitrust decision against Microsoft on Monday in a crucial victory for the European competition regulator over the U.S. software giant.

The European Union's second-highest court dismissed the company's appeal on all substantive points of the 2004 antitrust ruling.

The court said Microsoft was unjustified in tying new applications to its Windows operating system in a way that harmed consumer choice.

The verdict, which may be appealed only on points of law and not of fact, could force Microsoft to change its business practices.

"Microsoft must now comply fully with its legal obligations to desist from engaging in anti-competitive conduct. The Commission will do its utmost to ensure that Microsoft complies swiftly," Kroes said in a statement.

The court upheld a record 497 million euro ($689.9 million) fine imposed on the company as part of the original decision.

More importantly, it endorsed Commission sanctions against Microsoft's tying together of software and refusal to give rival makers of office servers information to enable their products to work smoothly with Windows, used by 95 percent of computers.

It annulled only the EU regulator's imposition of a Microsoft-funded independent trustee to monitor compliance.

Microsoft's response

Microsoft General Counsel Brad Smith was downbeat in speaking to reporters at the courtroom, promising the company would obey the ruling in full. He said there was no decision yet on whether to appeal to the European Court of Justice.

"It is clearly very important to us as a company that we comply with our obligations under European law," Smith said. "We will study this decision carefully and if there additional steps we need to take in order to comply with it, we will take them."

Microsoft has used every recourse open to it in every case brought against it by governments and regulators.

The company has weathered a series of defeats in antitrust cases in the last decade and sees legal setbacks as almost part of its business model and a price for its near-monopoly.

Microsoft has already moved to new battlegrounds such as seeking acceptance of its technical standards across the industry, while continuing to bundle new features into its new Vista desktop software.

The Commission ordered the company to sell a version of Windows without the Windows Media Player application used for video and music, which few have bought, and to share information allowing rivals' office servers to work smoothly with Windows.

"Microsoft has not demonstrated the existence of objective justification for the bundling, and ... the remedy imposed by the Commission is proportionate," the court statement said.

Another winner was the Free Software Foundation, which makes free, open software for work group servers.

The judges ordered Microsoft to pay the costs of FSF and those of the software giant's business rivals, which had supported the Commission's case. By contrast, Microsoft's allies were forced to bear their own costs.

The Commission must pay 20 percent of its own costs and 20 percent of Microsoft's while Microsoft must pay 80 percent of its own costs and 80 percent of the Commission's.

Since the original decision, the Commission has fined Microsoft a further 280.5 million euros, saying it had failed to comply with the interoperability sanction. The EU regulator is considering a further fine for non-compliance.

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